Can an employer commit a fundamental breach of contract by intentionally failing to pay an employee the full amount of pay properly due, even if making an honest mistake as to how much pay is due?

Yes, says the Employment Appeal Tribunal (Mrs Justice Slade DBE presiding) in Roberts v The Governing Body of Whitecross School.

Daniel Barnett’s Employment Law Bulletin reports:

The employee was off sick with stress and depression. The School decided to pay only half pay, rather than full contractual sick pay, on the basis of a mistaken interpretation of the Collective Agreement covering sick pay, thinking that it covered physical but not mental injuries.

The employee won a wages claim for sick pay, but lost a constructive dismissal claim, as the tribunal found that whilst the School was in breach of contract by not paying full sick pay, it was not in fundamental breach of contract.

The EAT overturned the employment tribunal’s judgment, as a finding of a fundamental breach was inevitable on the facts; the School had a ‘settled intention’ not to pay the full contractual sick pay due. The School had acted on its view of the contract, rather than simply asserting it.

The EAT doubted previous case law that repudiation might not occur when a party is acting under a genuine but mistaken belief as to the terms of a contract, but noted that it may not be a fundamental breach of contract for an employer to reduce pay by a material extent if its approach arose from an error or simple mistake.

The EAT remitted the case to a new tribunal to determine if the Claimant was constructively dismissed in response to the breach.