A few key action points for employers to consider arise out of this update:
1.The Rules say “An employee has been instructed by the employer to cease all work in relation to their employment only if the employer and employee have agreed in writing (which may be in an electronic form such as an email) that the employee will cease all work in relation to their employment.” Employers who have furloughed employees unilaterally, for example telling employees they are furloughed with or without inviting them to object if they don’t agree, may fall foul of this requirement because the employees has not agreed in writing to cease all work. Employers should therefore obtain express written agreement from employees not to undertake any work.
2. The Rules don’t allow for any sums that are “conditional on any matter” to be used for working out the 80% of pay that can be claimed. There is an argument that employers who have only agreed to pay furlough pay to employees if HMRC pay the employer, may have imposed a condition that renders no CJRS payment payable. There is also an argument that the reference to a condition must relate to a condition on normal pay (for example hitting a target to be paid a bonus or commission) and not to payment of pay funded by CJRS. Employers may wish to avoid this debate by removing any such condition, but before doing so should satisfy themselves that all other requirements under the Rules are met, to avoid exposing themselves to having to make the payment to the employee in circumstances where HMRC refuse payment to the employer (or reclaim the payment made at a later date)
3.The Rules require employees to be furloughed “by reason of circumstances arising as a result of coronavirus or coronavirus disease”. This helps clarify that the scheme is wider than only applying to employees who would otherwise have been made redundant. It may cause problems in relation to employees who were serving a period of notice to expire in March, April or May as a result of a pre-coronavirus redundancy situation. In these circumstances, the original cause of the dismissal (the pre-coronavirus redundancy situation) is not by reason of coronavirus. However, there may be an argument that furloughing employees during their notice was a decision taken as a result of coronavirus if they would ordinarily have worked their notice period but as a result of coronavirus there was no work to do. A further question arises as to whether such employees could have their notice extended to 31 May 2020 to allow them to be furloughed until the current end date of the CJRS. Such an extension would be unthinkable in normal times, as once notice ends, most employers will want the employee “off the books” asap. Again there could be an argument that extending the notice period to allow the employee to be furloughed for longer and therefore receive additional financial support given the difficulty in securing a job as a result of the coronavirus impact on the jobs market, could be a furloughing by reason of circumstances arising as a result of coronavirus. The risk employers take though is that if they agree to extend notice periods (or choose to re-engage employees whose notice periods have expired) and if HMRC later declines to pay out (or seeks to recover any payment made at a later date), employers will have to bear that cost. A further consideration is that during a period of notice there is an active duty to continue to look for alternative employment and to mitigate any consequences of the redundancy or to re-employ if business picks up which covid19 has interrupted. This imposes an additional obligation which, if not complied with, could render an otherwise fair dismissal unfair. Whilst extending furlough might by a nice thing to do for the employee, in the absence of clearer guidance, employers may be reluctant to extend furlough. One solution to the HMRC not paying issue may have been to make any further payments conditional on HMRC paying out under the CJRS, but as mentioned above, there is a question mark as to whether this will render no payment payable in any event.
4.The Rules have a general “play fair” provision which gives HMRC considerable scope to decline an application for support “No CJRS claim may be made in respect of an employee if it is abusive or is otherwise contrary to the exceptional purpose of the CJRS”. The Rules are silent on holiday pay. It is therefore unclear whether this provision will be used to avoid paying claims for periods of holiday or, where an employee is made redundant and is furloughed during their notice period, to avoid paying claims during such a notice period.
This article does not constitute legal advice. Please e-mail firstname.lastname@example.org if you wish to seek legal advice from one of our specialist employment law solicitors. This article was written at 1200 hrs on 16 April 2020 and readers should be aware that the CJRS is a fast moving subject and changes to or clarification of the above information may occur rapidly after this time.