Category: Employment law

Many businesses are considering laying off staff and taking advantage of the Government Job Retention Scheme.

Job Retention Scheme

This applies to ‘furloughed workers’. Please click here for more details. A brief summary is below:

• Employers will need to designate which of its employees will be furloughed workers.
• The Government will fund 80% of wages up to a maximum of £2,500 per month.
• The scheme is intended to run for 3 months but may be extended.
• This applies to any employee who was on the payroll on 1 March 2020.
• The Government expects to make grant payments by the end of April 2020, and they will be backdated to 1 March 2020.

Employment Law Issues

Employers do not have an automatic right to lay off staff. In most cases, any enforced lay off will amount to a repudiatory breach of contract on the part of the employer which would entitle the employee to resign and claim constructive dismissal, or, where no pay is provided, an unlawful deduction from wages.

Complications can arise where some but not all staff need to be laid off and it may be necessary to go through a selection process. Any selection should be reasonable and based on similar criteria to those used in redundancy. It is advisable to try to agree the criteria with employees or their representatives.

Collective Redundancy?

This may also amount to a redundancy situation.

If employees are laid off for longer than they need to be, they may be able to treat themselves as redundant and be eligible for redundancy payments.

Consultation

If it is a redundancy and 20 or more employees are proposed to be laid off during a 90-day period, there is a statutory consultation period.

There is an obligation to notify BEIS (the Secretary of State for Business, Energy and Industrial Strategy) in advance and to consult with employees individually and with elected representatives (or trade unions). If these consultation rules are not followed, the employer can be liable to a fine, plus a claim for protective awards from employees of up to 90 day’s gross pay. In addition, if the procedure that is followed is not fair, this could expose the employer to claims for unfair dismissal.

There is an exception in special circumstances where it is not reasonably practical to follow these procedures. We would have thought that the present Covid situation would amount to such ‘special circumstances’. Nevertheless, all employers are under an obligation, as far as possible, to make efforts to comply with the requirements.

Agreement with Employees

It is obviously preferable that in all cases, agreement is reached with the relevant employees and the agreement is confirmed in writing.

If you have any queries regarding any of the above, please do not hesitate to contact us.

We are getting many enquiries about the above Scheme.

This is a massive state intervention in business activity. Many businesses are going to be forced into hibernation or animated suspension. The scheme will enable businesses to retain their employees so that when this crisis is over, they can hopefully restart with minimal disruption. It offers business and employees an extremely valuable lifeline.

Furloughed Workers

The scheme applies to ‘furloughed workers’ only. ‘Furlough’ is a term which is typically used in the US and means putting employees on temporary leave of absence, where they do not work and do not receive pay, but are retained on a the books to be brought back when needed.

Key Benefits

The key benefits of the scheme are:

• The Government will fund 80% of wages up to a maximum of £2,500 per month. It is up to the employer whether to make up the balance.

• The scheme is intended to run for 3 months but may be extended.

• Importantly, these are grants not loans.

• This applies to any employee who was on the payroll on 1 March 2020.

• The Government expects to make grant payments by the end of April 2020, and they will be backdated to 1 March 2020.

• Employers will need to designate which of its employees will be furloughed workers.

• A new HMRC online portal will be established through which details will then have to be submitted, together with details of each employee’s earnings.

The details are still a bit sketchy and more details of the scheme will emerge over the next few weeks.

Risks

Fraud. Tt is important that employees are genuinely ‘furloughed’. If an employee is continuing to work and is placed on the scheme, this, in our view, amounts to tax fraud. Employers therefore must be very careful in how they offer the scheme and how they implement it.

Employment Laws. Employers also must comply with the usual employment walls. Any change to anyone’s employment terms must be made in accordance with existing laws and employment contracts. In practice, this means placing someone on the scheme must be voluntary and by mutual agreement.

Discrimination. You must also select employees in a fair way and must not discriminate against any employees e.g. based on age, disability or pregnancy.

We do expect all laws to be rigorously enforced if not now than later.

If you need any further guidance, please do not hesitate to contact us.