Breach of Contract: 5 Steps to Take if an Employee Breaches Their Contract

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Although serious, employee breaches of contract are generally a fairly rare issue, so if you’re feeling lost as to how to handle the situation, you’re not alone. Below, we lay out five steps to take if an employee breaches their contract. Just keep in mind that this information is general in nature and not intended as legal advice.

Engage Legal Advice

When an issue as serious as a breach of contract arises, it’s important to seek legal counsel as soon as possible. If you’re in a major city like Melbourne or Sydney, it should be easy to find a professional specialising in employment law. If you’re in a regional area like Kyabram or Holbrook, you may need to look for a business lawyer in Albury-Wodonga or your nearest regional city.

It’s generally best to engage your legal counsel before speaking to the employee about the breach. This may seem over the top, but it is the vital first step. Failure to act appropriately can cause even more problems for your business, so don’t take any chances.

Communicate with the Employee

The next step is to communicate with the employee who has breached their contract. This step will look different based on the legal advice you received when speaking with your lawyer. However, it will commonly involve meeting with the employee’s manager and your HR department.

The employee is entitled to have a support person or witness accompany them to this meeting. In serious cases, they may also wish to have their own lawyer present. If this is the case, it would be wise to bring your lawyer as well so everyone is on an even playing field.

Suspend or Dismiss the Employee

Depending on the severity of the contract breach your employee has committed, it may be appropriate to suspend or terminate their employment. When taking this route, it is vital to check that your actions will not constitute unfair dismissal. This is rare when a contract has been breached, but it’s not entirely impossible. So each step taken must be documented and compliant with the appropriate legislation.

Perform an Internal Review into What Went Wrong

In some cases, an employee may breach their contract for malicious reasons. Far more commonly, however, breach of contract occurs due to things such as a lack of knowledge, inadequate training, or workplace cultural factors. It stands to reason, therefore, that an employee breaching their contract is a clear sign that you need to perform an internal review of how you run things. This includes looking at what went wrong, why it happened, and whether it’s applicable to other staff in your organisation.

Seek External Assistance to Ensure the Situation Doesn’t Arise Again

Once you have identified what went wrong, it’s time to seek assistance in rectifying the issue so you don’t run into it again. For example, if you identified cultural issues within your organisation, you’d want to seek workplace diversity and inclusion training from an external provider. If the issue arose because of a lack of knowledge, however, it’d be wise to bring someone in to help you establish better onboarding and training procedures. This step will look different based on what the identified issue is, but hopefully, these examples help.

When an employee breaches their contract, the consequences can be major for all parties involved. That’s why it’s important to ensure the situation is handled correctly from the start. The information in this article should help, but please keep in mind that it serves as a general guide only. Personalised legal advice should always be followed when dealing with issues surrounding contracts.

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