The 26-year-old, without a club for the new season, is taking action after being released by the County at the end of last season after seven years at Old Trafford.
The leg-spinner, who played two Tests during the summer of 2000, believes his chances to sign for another club were affected by Lancashire's failure to tell him of their intentions not to resign him until last September.
Under the terms of new contracts for cricketers in this country agreed by the England and Wales Cricket Board (ECB) and the Professional Cricketers Association (PCA) last year, all clubs should appraise their players on an ongoing basis throughout the season, discussing their progress on the field and informing employees of areas which need to be improved.
The industrial tribunal in Manchester heard that while Schofield was appraised for the first part of the 2004 summer he was not informed of the county's future plans in regard to him until September 23, effectively the end of the season.
Lancashire cricket manager Mike Watkinson said the decision had been touch and go and he had not decided on whether to recommend a new contract for Schofield until the first week of September when his decision was ratified by the club's general committee.
Watkinson told the tribunal that Schofield, a player he said relied on confidence to perform well, had just broken into Lancashire's country championship side and he did not want to inform the player he could be released at a time when good performances might alter the final decision.
According to Watkinson, Schofield struggled whenever confronted with pressure situations or high-class opponents and he felt it was not in the individual's interests nor that of the team who were faced with the prospect of relegation from Division One.
Schofield will give his evidence on Tuesday when the hearing resumes.