COVID-19 – Employment law update digest – 04 May 2020

Coronavirus Job Retention Scheme – the work of union / employee representatives

After the HMRC portal for the Coronavirus Job Retention Scheme ('the Scheme') went live on 20 April 2020, employers (and employment lawyers!) everywhere breathed a collective sigh of relief that there were unlikely to be any more major changes to the Scheme.

For the most part, this has been the case, but there were a couple of further updates made to the Scheme's employer guidance (which can be found here) late last Thursday evening (30 April 2020). Thankfully, rather than confusing matters, these updates provide welcome clarification, in particular regarding the work of union and employee representatives.

The updated guidance makes clear that

"whilst on furlough, employees who are union or non-union representatives may undertake duties and activities for the purpose of individual or collective representation of employees or other workers".

It was previously uncertain as to whether those employees either already holding the post of union representative, or having been elected as an employee representative prior to a collective redundancy exercise, would need to be un-furloughed in order to carry out their duties, in order to avoid a breach of the Scheme. The most recent iteration of the guidance expressly states that employees can carry out such duties whilst continuing to undertake a period of furlough.

Given the wording of the updated guidance, it is likely that such 'duties and activities' will extend not only to those employees undertaking representative roles in collective consultation, but also to those who accompany colleagues to disciplinary or grievance hearings.

Furlough and family leave

Since the implementation of the Scheme, we have been advising our clients and contacts that any period of family leave to be taken by their employees after a period of furlough should be paid on the basis of their normal salary, rather than their furlough rate. This approach has now been confirmed by the Government.

For any period of maternity leave, paternity leave, shared parental leave, parental bereavement leave and adoption leave beginning on, or after, 25 April 2020, the employee will be entitled to pay based on their usual earnings, ensuring that those opting to take family leave will not have their entitlement to pay affected as a result of being furloughed.

Furlough and notice pay

Fairly early on in the life of the Scheme, it was well-established that employers would be able to serve notice of termination of employment on furloughed employees, and that reimbursement of wages during the notice period could be reclaimed through the Scheme (subject to the 80% / £2500 rule). However, the guidance has never clarified the applicable wage to be paid during that notice period – if an employee has agreed to accept 80% of their salary whilst on furlough, is their notice period also paid at 80%? Or are employers obliged to pay the full 100% salary during this time?

Our view is, on balance, that 100% of salary should be paid during the notice period, although 80% of this (subject to the £2500 cap) can continue to be reclaimed from HMRC during this time. There are very complex provisions in relation to notice pay, which are beyond the scope of this article. Suffice to say that a technical interpretation of these in the current situation would possibly result in employees receiving differing levels of notice pay, depending on their precise circumstances and contractual terms.

However, we consider (along with many other employment specialists) that the Employment Tribunal will not, on the grounds of public policy, wish to endorse a situation where an employee received less than their normal salary during their notice period, because they had agreed to be furloughed, and forego part of their normal salary, in an attempt to keep their employer trading and save jobs. There are a number of ways in which the Tribunal could interpret the existing legislation, in order to reach the desired conclusion.

It goes without saying that employers will be wanting to rein in their expenditure as much as possible during these uncertain times – so what may happen if an employer decides to pay only 80% of salary (or £2500, if applicable) during the notice period? Assuming our prediction of the Employment Tribunal's approach is correct, the employee will have a successful claim in the Tribunal or civil courts for the shortfall in their notice pay. In the circumstances, employers may wish to take the risk, but an important commercial point to consider – if an employer has dismissed an employee in breach of contract, by an underpayment of notice pay, they will not be able to rely on any post-termination restrictions contained within the employee's contract.

Furlough and annual leave – the debate continues

As set out in our previous briefings, the Government has now provided clarity that annual leave can be taken by employees whilst on furlough, without breaking the minimum three-week period. For any annual leave which is taken, the employer must pay 100% of normal salary, although 80% of salary, or £2500 if lower, can continue to be reclaimed from HMRC through the portal.

What is not clear is whether employees can be forced by employers to take annual leave during furlough. This option may be attractive to many employers which, assuming there are funds to 'top-up' salary to 100% for the period of annual leave, are likely to want employees to take a proportion of their holiday now in order to avoid capacity issues further down the line.

At present, in the absence of any express Government guidance to the contrary, we consider that all existing legislation points away from the ability to impose annual leave unilaterally during furlough. We are aware that a number of large employment law associations are currently lobbying for Government clarification on this issue, and we will update you as soon as there are any developments.

In the press… working during furlough

Two national newspapers have published reports that store managers of two major high street retailers are being asked to carry out work at least once a week, despite being furloughed under the Government's Scheme. Although these reports have yet to be confirmed, such actions would be in clear breach of the rules of the Scheme, and would entitle HMRC, as a minimum, to claw back payments made under the Scheme, if not impose penalties for fraudulent claims.

As a reminder, whilst your employees are on furlough, you cannot ask them to carry out any work that makes money for your organisation, or any linked or associated organisation; nor can they provide services for your organisation or any linked or associated organisation. They can, however, engage in training, subject to certain requirements.

Spotlight on….Property during COVID-19

New measures to protect high street and other businesses from aggressive rent collection

On Thursday 23 April 2020, the Business Secretary announced that

"high street shops and other companies under strain will be protected from aggressive rent collection and asked to pay what they can during the Coronavirus pandemic."

This follows the forfeiture moratorium that was imposed by the Coronavirus Act 2020 on 26 March 2020.

The Government's announcement observed that, whilst the majority of landlords have been reaching fair and sensible agreements with their tenants regarding debt obligations, there are some who have been putting tenants under pressure by the use of aggressive debt recovery tactics.

In order to mitigate the effects of this behaviour, the Government proposes to restrict temporarily the use of statutory demands and winding-up petitions where a company is unable to pay its rent due to COVID-19. The proposed restrictions will cover:

  • Any statutory demands made between 1 March 2020 and 30 June 2020.
  • Winding-up petitions presented from 27 April 2020 to 30 June 2020.

Also, in order to stop landlords seizing tenants' goods during the on-going crisis, the Government has said that it will modify the rules for Commercial Rent Arrears Recovery (CRAR), so that it cannot be used by landlords until they are owed 90 days of unpaid rent.

The draft legislation restricting the use of insolvency procedures has yet to be published, so it is still to be seen to which businesses it will apply, and what will have to be shown to prove that there is an inability to pay rent due to COVID-19.

Whatever the case, none of the legislation is expected to remove the underlying contractual liability to pay rent, even if that can only happen when the crisis is over.

If you would like more information on this topic, please contact Andrew Baines in our Property Litigation team.

[CONTENT CORRECT AS AT 04 MAY 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.

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This article is for information purposes only and is not a substitute for legal advice and should not be relied upon as such. Please contact our specialist lawyers to discuss any issues you are facing.