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On 20 April 2020 the Coronavirus Job Retention Scheme (“Scheme”) application portal opened. The Scheme applies to employees who have been asked to stop working, but who are being kept on the pay roll, otherwise described as ‘furloughed workers’. HMRC will reimburse 80% of their wages, up to £2,500 per month. This is to safeguard workers from losing their jobs due to the COVID-19 outbreak.
The Scheme has been developed very rapidly. Since being announced on 20 March 2020 there have been various iterations of guidance notes aimed at both employers and employees. Often these updates have contained fundamental changes to the Scheme and been published last thing on a Friday ruining employment law practitioners’ weekend plans (to the extent that weekend plans are still possible in the current circumstances)!
Common questions from businesses include: How do you put employees on furlough? Is employee consent required or can this be done by notification? This article will examine a recent case on this topic and set out what the current position is.
Carluccio’s Limited High Court Decision
On 13 April 2020 the High Court released its judgment in relation to Carluccio’s, which is a restaurant chain placed into administration on 30 March 2020. As part of the administration process, the administrators sought to put employees on furlough leave. The intention was to save money, retain jobs and make the business more attractive to a potential buyer. This is permissible and in accordance with the HMRC guidance.
On 3 April 2020 the administrators wrote to the employees seeking their consent to be furloughed stating that if this was not provided then their roles may be redundant. While most employees did provide their consent there were a number that either rejected the offer or did not respond at all. The administrators sought the direction of the Court in relation to a number of questions so as to give them comfort that they were acting lawfully.
The Court held that, in the case of the employees that had provided consent, their contracts of employment had been lawfully varied. The Court rejected the argument that the contracts of those employees who had refused or had not yet responded had also been amended. However, the Court went on to determine that the employees that had not replied, can now do so and be placed in the same position as those who agreed to be furloughed straight away. It is notable that the letter from the administrators did not mention what would happen if consent was not given and did not state that it would be implied in the absence of any written response to the contrary.
At the time of writing, the employee version of the guidance states that “[b]oth you and your employer must agree to put you on furlough”. This raised alarm bells for employers that had merely informed employees that they were going to be furloughed and not requested consent or had assumed it. For large employers a requirement of written consent from all employees at short notice would create an administrative burden.
However, the employer guidance was updated on 20 April 2020 stating that “[e]mployers should discuss with their staff and make any changes to the employment contract by agreement. When employers are making decisions in relation to the process, including deciding who to offer furlough to, equality and discrimination laws will apply in the usual way.
To be eligible for the grant, employers must confirm in writing to their employee confirming that they have been furloughed. If this is done in a way that is consistent with employment law, that consent is valid for the purposes of claiming the CJRS. There needs to be a written record, but the employee does not have to provide a written response. A record of this communication must be kept for five years”.
The updated guidance from HMRC in relation to obtaining employee consent to furlough may give comfort and reduce administrative burdens for employers seeking to rely on the Scheme. However, I believe that it would be best practice in almost all cases for employers to seek explicit consent from employees. In the circumstances, email would be best. This is because, in the absence of a contractual right to lay off, it is likely that furloughing employees without their consent would be a breach of contract (and almost certainly if the employer is not going to top up salary to 100%).
It is clear that, at the very least, the employer must write to the employees informing them that they will be put on furlough and then keep a record of this communication for five years. However, in most cases it would be advisable to seek the employees’ consent to this contractual change. The correspondence should clearly set out why the proposal is necessary and what the consequences of refusal might be. It may also be advisable to set out in the correspondence that if the employer does not hear from the employee by a certain date, that consent will be assumed so that the employer can process payroll and avail of the Scheme. However, the consent should still be chased up and obtained in due course.
In cases where employers are seeking to only put some of their staff on furlough, the employer will need to be able to explain the rationale for the selection of employees for the furlough process and should be mindful of any potential for discrimination claims.
This article has been produced for general information purposes and further advice should be sought from a professional advisor. Please contact our Employment team at Cleaver Fulton Rankin for further advice or information.