9th April 2020
Most employers will be familiar with the Coronavirus Job Retention Scheme, but they may be less familiar with the legal requirements in respect of the scheme. This article gives an overview of the legal issues which businesses should be mindful of.
Andrew Rayment, Partner, and Charlotte Smith, Associate, of Walker Morris’ employment team recently held a webinar in which they talk about these matters in more detail including a question and answer session.
In particular, the following key points should be noted:
There is no mention in the scheme guidance of a requirement to submit documentary evidence of the “business case” to furlough workers, or the “financial means” of the employer to pay staff. However, once the HMRC portal opens it could, of course, include additional requirements and, in any event, HMRC has clearly reserved the right to retrospectively audit employers who have made claims.
Employers should therefore keep clear records of the reason for placing employees on furlough leave which, in most cases, will show that there was no work that the individual could do (because, for example, the factory was shut), or there was a reduced requirement for the work that individuals could do (because, for example, there has been a down-turn in customer orders – therefore a certain number of individuals completing the same role have been selected to be placed on furlough leave).
One of the policy reasons behind the scheme is to “avoid redundancies”. However, this does not necessarily mean that an employer must use the same selection criteria that it would for a redundancy exercise in order to select people to place on furlough leave – particularly given the time constraints.
What employers should be careful of, however, is basing selections on criteria that could potentially give rise to discrimination claims (for example, selecting all junior members of staff could give rise to age discrimination claims, or selecting all employees who have child-care responsibilities may give rise to claims for sex-discrimination). As such, the key thing is for businesses to look at areas where the work has temporarily gone or diminished, and use objective criteria to select who to furlough.
Thought also needs to be given to how the furlough scheme inter-relates to sickness arrangements, especially those newly created categories, such as those who are “shielding”.
The guidance states that to be eligible for the subsidy under the Scheme, employers should write to their employees confirming that they have been furloughed and keep a record of this communication. As usual employment law principles still apply, this should be completed as a contractual variation. The key points to include in the letter are as follows:
The usual principles relating to varying employment contracts apply. However, we recognise that this is a time-critical matter (particularly given that the scheme is only open for an initial three month period from 1 March – 31 May 2020), which means that it is difficult to follow a full procedure. Broadly speaking, the options are: