As you can imagine, as an employment solicitor, I have been inundated with enquiries regarding furlough leave since Friday evening’s announcement. The difficulty is the guidance issued is minimal and furlough leave is an entirely new concept with no legal basis or meaning in the UK. I am sure further details will be released over the next few days, but until then, businesses are forced to make decisions based on what we do know about the new Scheme, while applying the ordinary principles of employment law.
What we do know, is that a grant will be available for all businesses to fund 80% of each workers wage’s, up to £2,500 per month. We know that employers can designate that a worker is on furloughed leave, and that the employer must register and apply for the grant through a HMRC portal, a portal that does not exist yet!
If your contracts of employment, like the vast majority of businesses, do not include “lay off” or “short time” working provisions, then it appears you will need your employees agreement to furlough leave – failure to reach agreement is likely to amount to a breach of contract. However, are many employees likely to refuse to agree when the alternatives are, closing the business, reduced hours (which could result in less than 80% pay), redundancy or dismissal without a redundancy payment, particularly in these unprecedented times when we are being asked to pull together.
Against this background, and despite the lack of detail, my advice is to get the ball rolling now. The first step is to work out which and how many roles within your organisation could be furloughed. If you are going to need to decide which employees are furloughed, for example if you decide that 4 of your 6 secretary roles could be furloughed, then my advice is to come up with selection criteria like you would in a redundancy exercise. In an ideal world, you will consult on the proposal with staff and if applicable trade unions, but you might not have time for anything other than a brief process.
The next step is to talk to your employees! For some, the idea of not working but being paid 80% of their wages will be quite an attractive option. Indeed, we may see tension between those required to continue working and those at home receiving 80% of their wages. If you have an employee’s agreement to furlough leave, the risks are minimal, and you might decide to agree immediately, send the employee home, and worry about the detail (including the grant) later.
Please note however, an employee cannot insist that they are furloughed. If you require a particular employee to work and they refuse, they will either be “sick” (because they are too unwell or because they are self- isolating) or their refusal may be a matter for disciplinary.
If an employee refuses to go on furlough leave, then as above, forcing them to do so is likely to amount to a breach of contract. In these circumstances, you will need to decide whether to push ahead with redundancy, or to force through a variation to their contract. I am on hand to advise on both of these scenarios.
While finally, there are the Collective Consultation Regulations to consider – currently, if you are proposing to dismiss 20 or more employees, by reason of redundancy, in a 90 day period, then you are required to submit a HR1 Form to the Secretary of State, to elect employee representatives and to consult with those representatives for 30 days prior to any dismissals taking place. It is likely to be the case, that proposing to place 20 or more employees on furlough leave (without a contractual right to do so) triggers the obligations under the Regulations. Again, I am on hand to advise if you are considering over 20 employees, and you do have options within that 30 day period including placing the employees on furlough leave in breach of their contracts and without agreement.
The big and obvious hole in the Government’s announcements, is their expectations and plans for the self-employed – what happens to their earnings? Over the weekend, I had a number of queries in this regard and became aware of petitions to Parliament seeking further support, but unfortunately the current position is that the self-employed do not appear to be covered by the Corona Virus Job Retention Scheme. Interestingly, the Scheme refers to “workers” and not employees, so one hopes that Boris understands the significance of that description and the Scheme is available to both workers and employees.
James Twine, Head of Business Services
Partner, Solicitor, Head of Business Services