For weeks, the numerous iterations of the Government guidance on the Coronavirus Job Retention Scheme (the Scheme) stated that, to qualify for reimbursement under the Scheme, employers only needed to notify employees that they were to be placed on a period of furlough. Although we advised our clients and contacts that, for a ‘belt and braces’ approach, they should obtain agreement from each employee in writing (given that there was a change to terms and conditions), the Government did not require this.
When the Treasury Direction was introduced on 15 April 2020 a whole host of confusion ensued. The Direction stated that, in order for employers to furlough their employees, they must obtain agreement in writing. Whilst the list of information to be provided to HMRC at the point of application for reimbursement did not include evidence of written agreement, the wording of the Direction left employers concerned that any subsequent HMRC review of their application may negate their entitlement to reimbursement, leaving them liable to repay the monies received. In addition, there was the risk that employees who were dissatisfied with the decision to furlough may alert HMRC to their employer’s potential lack of compliance.
This change in approach brought about by the Direction was not reflected in the most recent version of the Government guidance, leaving a clear inconsistency between the two documents. However, given that it was likely that the Treasury Direction would take precedence over the Government guidance, employers who had not yet obtained written agreement from their employees set about trying to obtain this retrospectively, with all the difficulties associated with remote working and the lack of access to the office franking system.
Barristers were lamenting the lack of clarity, and were assessing the ways in which a viable action for judicial review could be mounted. Not that this, of course, provided any immediate help or reassurance for those employers at the coal face, trying to ensure that their reimbursement from HMRC was secure.
Then, last Thursday afternoon (23 April), an indicative letter from an individual who works within the office of Jim Harra, the HMRC Chief Executive and First Permanent Secretary, was sent to a barrister in response to an email outlining his concerns about the clear disparity.
The letter indicates that employers should follow the Government guidance when furloughing their employees and making reimbursement claims for the same (the most recent iteration of the guidance is here) and HMRC will treat applications for reimbursement in accordance with the guidance. However, the devil is in the detail, and it is important to take note of specific passages of the letter, as follows:
“Employers should discuss with their staﬀ and make any changes to the employment contract by agreement. There needs to be a written record, but the employee does not have to provide a written response.
Put simply, the employer and the employee must reach an agreement and an auditable written record of this agreement must be retained. It does not necessarily follow that the employee will have provided written conﬁrmation that such an agreement was reached in all cases.”
What does this mean for employers? Well, it is clear that agreement to furlough needs to be reached between employer and employee (so, not just a unilateral notification of furlough). However, this agreement could be verbal and then recorded in writing, most obviously by way of a letter to the employee, which also notifies them of the details and logistics of the furlough. This will obviate the need for employers to seek, and likely follow up on, any requested written confirmation from the employee: something which may be even more difficult than usual to achieve in the circumstances.
The latest available statistics show that over 185,000 claims have been made through the portal during the past week, which covers more than 1,300,000 furloughed employees and amounts to a total value of £1.5 billion.
The British Chamber of Commerce is conducting a weekly ‘COVID-19 tracker poll’, and the results of the latest survey show that the proportion of private companies which have furloughed at least some of their staff has now increased to 71%.
The various iterations of the Government guidance on the Scheme, alongside amendments to the Statutory Sick Pay regulations, have, slowly but surely, provided some protection for those who are shielding or self-isolating. In these instances, it is clear that those employees affected should remain away from the workplace, at least for a period of time, and there is financial provision for their absence from work.
However, our clients in sectors where business is still fully or partially operational (and where work cannot be carried out from home) are receiving increasing numbers of queries from employees who do not wish to come to work during the Coronavirus (COVID-19) crisis, due to the risk of contracting the disease whilst in the work environment or whilst travelling. In situations where these employees are not required to self-isolate or shield, how does the employer respond?
As you might imagine, the law is somewhat ill equipped to deal with such an unprecedented situation which has none of the hallmarks of any envisaged when the Employment legislation was drafted.
Some employers might take the view that an employee’s refusal to attend work, when there is no medical or Government instruction requiring them to stay at home, is a breach of a management instruction warranting disciplinary proceedings and possible dismissal. Whilst we understand fully that dealing with such employee concerns at a time when business is tough will be an additional drain on time and resources, it is worth bearing in mind that the entire world is navigating uncharted territory. We are dealing with a virus about which very little (particularly in respect of the spread and any mutation) is known. What is certain is that there is likely to be a wealth of satellite litigation after the dust has settled, and Employment Tribunal Judges are not likely to look kindly on those employers who have reacted in a knee-jerk fashion to employees’ concerns.
There is also the risk that unfavourable action taken by employers in such situations may give rise to claims by employees under s.44(1)(d) and s.100(1)(d) Employment Rights Act 1996. Under these provisions, employees have the right not to be:
Subjected to any detriment by any act, or any deliberate failure to act by their employer; or
Dismissed on the ground that “in circumstances of danger which the employee reasonably believed to be serious and imminent and which he could not reasonably have been expected to avert, he left (or proposed to leave) or (while the danger persisted) refused to return to his place of work or any dangerous part of his place of work”.
It is important to note that any dismissal in this context will be ‘automatically unfair’, such that an employee will not require two years’ service (unlike in most unfair dismissal cases) in order to bring a claim.
Inherent in these provisions is a requirement for an employee’s ‘reasonable belief’ of a danger which is ‘serious and imminent’. Current case law suggests that these concepts will be broadly interpreted by the Employment Tribunal. It is more than likely that, in due course, the Tribunal will need to decide, in respect of a live claim, whether the circumstances and effects of COVID-19 will meet the “‘serious and imminent danger'” test, although we consider it is likely to do so.
The only possible caveat to the above is where employers are following the Public Health England Guidelines strictly, in terms of social distancing, cleanliness practices and (where applicable) provision of PPE. The Government has already issued guidance regarding the appropriate conduct in a manufacturing setting (the full guidance can be found here), which includes instructions such as:
Increasing the frequency of cleaning procedures, pausing production in the day if necessary for cleaning staff to wipe down workstations with disinfectant.
Assigning staff to the same shift teams to limit social interaction.
Not allowing staff to congregate in break times; considering arrangements such as staggered break times so that staff can continue to practise social distancing.
Communicating to all staff that they should wash their hands with soap and water for 20 seconds or more at the beginning and end of every break, when they arrive at work and before they leave. Considering additional pop-up handwashing stations or facilities, providing soap, water and/or hand sanitiser.
When entering and leaving, ensuring the workforce stays 2 metres apart as much as possible. To protect your staff, reminding colleagues daily that they should only come into work if they are well and no one in their household is self-isolating.
Unfortunately, although the situation is not at all clear, the implementation of stringent measures such as the above should make any instruction to attend work more reasonable in the eyes of the law. It may be that, rather than escalating matters in times of already high stress, practical solutions could be agreed with employees on a case-by-case basis, perhaps, for example, the agreement of a temporary non-attendance at work through the use of unpaid or annual leave.
In the second Coronavirus (COVID-19)-related court case in as many weeks, it was the turn of ailing high street store Debenhams to appear before the High Court in respect of an urgent application.
Debenhams recently entered administration following a lengthy period of trading difficulties, which was exacerbated by the Coronavirus (COVID-19) pandemic, when all 147 of its stores were closed following Government restrictions. Prior to entering administration, Debenhams notified around 13,000 store staff that they were being furloughed until further notice. By the time the administrators were appointed by Debenhams’ directors, on 9 April 2020, the vast majority of employees had already been placed on furlough.
The key issue was whether the employment contracts of the employees who had been furloughed would be deemed to have been adopted by the administrators if the employees remained furloughed or whether the administrators would need to take any further affirmative action in respect of those employees, for example, paying them the amounts to be reimbursed by HMRC through the Scheme.
It was concluded by the Court that it was likely that participation in the Scheme, and the subsequent payment to the furloughed employees, would result in the administrators being held to have adopted the contracts of employment.
This (along with the previous judgment in Re Carluccio’s Limited (in administration) ) is quite a technical decision with specific implications for the insolvency arena. If you would like more information on this topic, please contact Sacha Pickering in our Restructuring & Insolvency team.
[CONTENT CORRECT AS AT 27 APRIL 2020]
If you would like to discuss any of the issues raised in this briefing, or have other concerns about the impact of Coronavirus, please contact Rachael Lloyd, James Baker or Andrew Tobey in Michelmores’ Employment team.