For many years, industrial tribunals and appellate judges have been bemoaning the inability of industrial tribunals to make awards in respect of breaches of contract.

Claims brought in tribunals for pay in lieu of notice have failed due to the jurisdictional limitations set out in the Wages Act 1986 (as interpreted by the House of Lords in Delaney v Staples [1992] 1 AC 687).

The prohibition on contractual claims has rightly been seen as a source of ridicule within one of the areas of law most often encountered by the public.

Most advisers have had the unenviable task of explaining to a disgruntled employee why they can recover holiday pay but not payments in lieu of notice.However, on 11 July 1994 this changed.

The Lord Chancellor, exercising powers conferred upon him by s.131 of the Employment Protection (Consolidation) Act 1978, ordered that industrial tribunals should have the power to hear breach of contract claims.

It will no longer be necessary for employees to bring actions in both the industrial tribunal and the county court.

They can now sue for both wrongful dismissal and unfair dismissal in front of the one body.Under the new order (SI 94/1623), an employee (but not an employer) can bring a claim for breach of contract in the industrial tribunal provided the employment has actually been terminated.

Clearly one would not seek to claim pay in lieu of notice before a dismissal, but this requirement precludes employees from seeking compensation for, for example, refusal to pay holiday pay whilst the employment relationship is still ongoing or, where there has been no dismiss al or resignation, seeking damages if and when an employer embarrasses an employee in front of colleagues in breach of the duty of trust and confidence.

The reason for this is not clear, save for the paternalistic hope not to upset the employment relationship, or possibly to avoid the floodgates opening with petty employment disputes.It is a precondition to the bringing of a contract claim that the effective date of termination of the contract of employment (as defined by s.55(4) of the 1978 Act) be either on or after 12 July 1994.

If there is no effective date of termination then the last day upon which the employee worked must have fallen on or after 12 July.

In any event, the claim must be brought within three months of the effective date of termination or last working day; the tribunal has the discretion to extend this period if it was not reasonably practicable to bring a claim within the three months.Certain contractual claims are expressly prohibited.

Employees cannot claim for personal injuries - no doubt on the policy ground that such claims are better heard before county courts.

In addition, claims relating to the following contractual terms are excluded:-- the provision of living accommodation;-- intellectual property (which is defined to include copyrights, registered designs, patents and trade marks);-- terms imposing obligations of confidence; and-- covenants in restraint of trade.These claims are, of course, still matters which can be litigated before the county court or High Court.Once a contractual claim has been presented to the industrial tribunal by an employee, the employer is entitled to counterclaim in respect of alleged breaches of contract by the employee.

This might include such claims as damages for business lost through an employee's failure to work with reasonable care and skill.

It should be noted that employers do not have an originating right of action, but simply the right to counterclaim once a claim has already been brought.This right applies only to contractual claims brought by employees; the employer cannot counterclaim when the action against him or her is in respect of a claim that the employee could have brought irrespective of the new order - such as claims for unfair dismissal, discrimination and redundancy.

The order prohibits counterclaims for the same matters set out above.The relevant time limit is six weeks from the date that the employer - rather than the Central Office of the Industrial Tribunal - receives the employee's application.

Although there is the usual discretion to extend if it was not reasonably practicable to present the counterclaim within the time prescribed, it is difficult to see when, in practice, an employer would be able to show that it was not reasonably practicable since ignorance of the right to claim is not sufficient and, save with very small businesses, presentation of the claim will not depend simply on the efforts of one employee who may be temporarily incapacitated.The maximum amount that a tribunal has power to order is £25,000.

Although it is not clear from the order, it is likely that claims worth over £25,000 will become submerged in the judgment for £25,000.

Thus it will not be possible to claim £25,000 in a tribunal, where the cases will often be heard with greater speed, and wait for the excess to be awarded in the county court.

Consequently, if a claimant has a reasonable expectation of recovering more than £25,000, he or she ought to bring proceedings in another venue.SI 94/1623 sees a further step taken towards fulfilli ng one of the principal rationales behind the setting up of tribunals, namely the provision of an open-to-all judicial service not involving commencement fees or (ordinarily) the risk of costs.