06/05/2020
Contents
Current Issues
- Shielding and Vulnerable Employees
- CJRS – Requirement for Written Agreement
- Public Sector Organisations
- Annual Leave
Looking into the Future - Potential Workforce Issues, Challenges and Litigation Risk for Employers
- The CJRS and Implied Consent – Practical Implications and Potential Litigation
- Lay-off and Short-time Working
- Redundancies
- The Future
In response to COVID-19, over recent weeks we have seen a rapid introduction of new legislation, Government schemes and a raft of Government guidance, intended to assist both employees and employers. However, these changes have raised a number of workforce issues for employers concerning how both the legislation and guidance should be interpreted and applied.
Many of the issues concern the Coronavirus Job Retention Scheme (the “CJRS”) – introduced by the Government to help employers whose operations have been affected by COVID-19 maintain their workforce. The CJRS portal is now up and running and it is currently set to be available for employers until the end of June 2020. The Government has published several reiterations of guidance for employers (“Employer Guidance”) and employees (“Employee Guidance”) detailing how the CJRS will operate and who will be eligible. The Treasury also issued a direction to HMRC on 15 April 2020 (the “Direction”) providing further information as to who is eligible. Unfortunately there have been a number of discrepancies between the Employer and Employee Guidance and the Direction, which has created more uncertainty in this challenging time.
In this edition of Employment Eye, we set out our views on some of the key issues that employers have had to face during this period in relation to the CJRS, vulnerable employees and managing their workforces more generally, and take a brief look at some of the longer term potential workforce issues which may arise as a result of the pandemic. In our next issue, we will be going into these in more detail.
This article does not constitute tailored legal advice. The employment law issues around COVID-19 are both complex and developing rapidly and we recommend that you seek legal advice on individual cases.
This article is based on legislation and Government guidance as at 4 May 2020.
References throughout to “employees” should be taken to mean employees in a general sense and does not necessarily convey the meaning given to this term in employment law.
Current Issues
Shielding and Vulnerable Employees
One of the most challenging issues currently facing employers is how to manage employees who either fall into one of the “vulnerable” groups identified by Public Health England (“PHE”) or are disabled within the meaning of the Equality Act (the “EqA 2010”). Employers have a legal duty to protect the health and safety of all of their employees and the particular characteristics and vulnerabilities of individuals should be taken into account.
Who are “shielding/extremely vulnerable” and “vulnerable/increased risk” employees?
“Shielding/extremely vulnerable” employees are those who are at greatest risk of severe illness from COVID-19 because of a specific medical condition (as listed in PHE Guidance). These individuals should have either received a letter from the NHS or been contacted by their GP. They have been strongly advised by PHE to stay at home and avoid any face-to-face contact until the end of June 2020.
“Vulnerable/increased risk” employees are those who are at increased risk of severe illness from COVID-19 because they are aged 70 or older, under 70 with an underlying health condition (as listed in PHE Guidance) or pregnant. They have been advised take particular care to minimise contact with others outside of their household. They have not been advised to shield.
Are shielding and/or vulnerable employees entitled to Statutory Sick Pay (“SSP”)?
The Statutory Sick Pay (General) (Coronavirus Amendment) (No. 3) Regulations 2020 (the “SSP Regulation”) provide that those who are defined by public health guidance as extremely vulnerable and have been advised to shield in accordance with that guidance are deemed incapable of work and entitled to SSP. The SSP Regulation came into force on 16 April 2020 and it does not appear to have retrospective effect.
Vulnerable/increased risk employees are not currently entitled to SSP, unless they are self-isolating in accordance with PHE Guidance on the basis that they or someone they live with is displaying COVID-19 symptoms.
Can shielding employees be furloughed?
The Direction states that an employee cannot be furloughed whilst they are paid, or liable to be paid, SSP (whether or not a claim for SSP is actually made). One implication of this is that the SSP Regulation has the seemingly unintended consequence of excluding shielding employees from being eligible for the CJRS from 16 April 2020 onwards as they are entitled to SSP.
However, this interpretation contradicts the latest Employer Guidance. As with the previous iterations issued before the Direction, this states that employers are entitled to furlough employees who are shielding or on long-term sick leave and that it is up to employers to decide whether or not to furlough these employees. We understand that HMRC has informally indicated that employers should follow the Employer Guidance because applications for reimbursement will be granted in accordance with this.
There are clear inconsistencies between the Direction, Employer Guidance and SSP Regulation and we do not know with any certainty how HMRC will apply these to the CJRS. However, as the latest Employer Guidance has not altered in relation to furloughing shielding employees, we take the view that employers can choose whether to furlough shielding employees or put them on SSP. There will, however, be some element of commercial risk for employers should they take this step, in the event that HMRC decides to apply the strict wording of the Direction that an employee cannot be furloughed whilst they are entitled to receive SSP.
On a less controversial note, the Employer Guidance is clear that employees who are unable to work because they need to stay home with someone else who is shielding can be furloughed.
Please see our full article for further information on this issue.
Can vulnerable employees be furloughed?
The Employer Guidance is silent on this issue. However, it is up to employers to decide which employees to offer furlough leave to and an employer could opt to furlough vulnerable employees for business reasons.
When using the CJRS portal to make a claim, employers are required to make a declaration that they are claiming "costs of employing furloughed employees arising from the health, social and economic emergency resulting from coronavirus" (emphasis added). We take the view that this covers furloughing vulnerable employees due to the potential impact of COVID-19 on the health of these individuals and the economic stability of the business if they are unable to work.
In deciding which employees to furlough, employers must be aware of equality issues and the decision must not be based on discriminatory criteria. Selecting all employees aged 70 or over for furlough leave could give rise to claims for age discrimination, although this could possibly be justified as a proportionate means of achieving the legitimate aim of protecting the health and safety of vulnerable employees. A less risky option would be to draw up an objective set of criteria which does not target specific groups.
What other options are available for shielding and/or vulnerable employees?
Given that shielding employees are strongly advised by PHE to stay at home, the main options for these individuals (in addition to SSP and furlough leave) will be:
- homeworking in their existing role,
- redeployment into a role suitable for homeworking, or
- allowing a discretionary period of leave, which the employer may be able to offer on full pay.
In relation to vulnerable employees, as these individuals are currently advised to socially distance rather than shield, additional options where the employee cannot work from home could include continuing to work at a safe (at least 2 metre) distance, redeployment into a low risk role or location, reduced working hours or days, or requiring employees to use annual leave.
We recommend engaging with your shielding and vulnerable employees and discussing all of the viable options. If you intend to redeploy your employees, reduce their working hours and pay or furlough them, you will need to obtain their consent.
What if an employee considers that they fall within the shielding group but they have not received an NHS letter or been contacted by their GP?
Extremely vulnerable individuals should have either received a letter from the NHS or been contacted by their GP. PHE Guidance states that if an individual has not been contacted but nevertheless consider that they fall into the extremely vulnerable category then they should discuss their concerns with their GP or hospital clinician.
Employers who are aware, for example from personnel records, that an employee has one of the specific medical conditions listed in the PHE Guidance which puts them at greatest risk of severe illness from COVID-19, should not wait for a letter before determining that they are shielding/extremely vulnerable and taking appropriate action.
What if a shielding and/or vulnerable employee insists on continuing to work?
PHE Guidance for shielding and vulnerable individuals is advisory and it is up to individuals to decide whether or not to follow the recommended measures. Whilst it is an individual employee’s decision as to whether they wish to continue to come into work and be paid, employers should proceed with caution to ensure all other options are explored and that appropriate risk assessments and measures are put in place if the individual continues to attend work.
If shielding or vulnerable employees do continue to work, the employer must undertake a health and safety risk assessment to determine any measures that may be necessary to protect them at work.
Whilst some organisations are taking steps to confirm working arrangements and expectations by asking shielding and vulnerable employees to sign a declaration which states that they are aware of the risks and they still wish to continue to work, these declarations do not waive liability in respect of legal claims, because employers cannot “contract out” of personal injury claims.
Employers should ensure that they have proper written records and an audit trail of documentation to rebut any potential future allegations that an individual felt pressured to continue to work (and a declaration letter may help to show this), or that they were not adequately supported, reasonable adjustments were not carried out or health and safety duties not met. This is particularly important for staff who may be disabled under the EqA 2010 and/or are pregnant.
What health and safety duties do employers owe to pregnant employees?
Employers have a legal duty under the Management of Health and Safety at Work Regulations 1999 (the “MHSWR”) to make a suitable and sufficient assessment of the risks to the health and safety of its employees to which they are exposed while at work. Once the risks have been assessed, the employer is required to put in place the appropriate health and safety measures to control those identified risks.
Employers have additional statutory duties under the MHSWR to protect the health and safety of pregnant employees, including a duty to:
- Assess the workplace risks posed to pregnant employees by COVID-19;
- If it is reasonable to do so and would avoid the risk, alter the employee’s working conditions/hours of work;
- Where it is not reasonable to alter the employee’s working conditions/hours or it would not avoid the risk, offer the employee suitable alternative work on terms that are not “substantially less favourable”; and
- Where suitable alternative work is not available, or the employee reasonably refuses it, suspend the employee on full pay. This is mandatory if none of the above steps would avoid the risk.
The risks referred to above are referenced to a level of risk at work which is higher than the level to which a pregnant employee may be expected to be exposed outside the workplace.
If an employer fails to comply with health and safety legislation then they may be committing a criminal offence as well as potentially being liable for civil claims from pregnant employees.
Can pregnant employees be furloughed?
Although the Employer Guidance is silent on this point, it is our view that employers can furlough pregnant employees. However, the CJRS does not take away the rights of a pregnant employee. This means that if a pregnant employee would ordinarily have been suspended for health and safety reasons, notwithstanding the CJRS, this should be on full pay or alternatively, the pregnant employee can be furloughed with topped up pay.
Employers who furlough pregnant employees and fail to top up pay to the full contractual amount are at risk of a range of employment tribunal claims including; unlawful deduction of wages, unlawful detriment on the grounds of pregnancy, unfavourable treatment under the EqA 2010, or a claim under section 70(1) Employment Rights Act 1996 (“ERA 1996”) for failure to pay remuneration which the employee is entitled under maternity suspension.
How should we manage employees who are disabled?
Employers have a duty to make reasonable adjustments in respect of employees who are disabled within the meaning of the EqA 2010. We recommend that employers consider and discuss with disabled employees, or seek medical advice from the employee’s GP or Occupational health, as to the potential risks and what adjustments could be put in place to assist them to continue to work.
CJRS – Requirement for Written Agreement
Following the issue of the Direction, the question of whether employees need to provide written agreement to be placed on furlough leave has become a particularly vexed issue. Thankfully, HMRC has shed some light on the approach that employers should take.
Do employees need to confirm their agreement to furlough leave in writing?
Under the Direction, an employee can only be furloughed where the employee’s cessation of work has been agreed in writing between the employee and the employer. This appears to require the employee’s consent to furlough in writing before they will be eligible for the CJRS and there is no suggestion that this can be obtained retrospectively.
The requirement to obtain written agreement was not clearly indicated in earlier versions of the Employer Guidance, which merely required employers to notify their employees in writing that they had been furloughed.
The latest iteration of the Employer Guidance now states that an employer must confirm in writing to their employee that they have been furloughed, and if this is provided in a way that is consistent with employment law, that consent is valid. Whilst there must be a written record, the employee does not have to provide a written response.
Whilst discrepancies between the Direction and Employer Guidance remain, we are aware that HMRC has informally indicated that an employer will not be prevented from accessing the CJRS purely because they have not obtained written agreement from their employee to cease all work.
Notwithstanding this indication from HMRC, we believe it would still be better to obtain employees agreement to furlough whether by letter, email or text message for example. See “The CJRS and Implied Consent – Practical Implications and Potential Litigation” below for some of the consequences of failing to obtain express consent.
Do employers need to keep a written record confirming agreement?
Yes. The Employer Guidance states that employers must confirm in writing to their employee that they have been furloughed and a record of this communication must be kept for 5 years.
Public Sector Organisations
A large number of public sector organisations will be providing frontline services throughout the COVID-19 crisis and will therefore not be experiencing any reduction in services. However, there are still some public sector organisations whose operations will have been impacted by COVID-19 (or where the health and safety of their staff means that they have been advised to shield) and may therefore be facing challenges around how to maintain their workforce and manage the economic impact of the pandemic.
Can public sector organisations or organisations who receive public funding use the CJRS?
It depends. At the time of writing, the Employer Guidance states that the CJRS will not be used by many public sector organisations, as most public sector employees are continuing to provide essential public services or contribute to the response to coronavirus. Where employers receive public funding for the costs of their workforce (such as many social care providers who deliver local authority commissioned services) and this funding is continuing, employers are expected to use this to pay their employees in the usual fashion. In addition, organisations who are receiving public funding specifically to provide services necessary to the response to COVID-19 are not expected to furlough their employees. These aspects of the Employer Guidance clearly restrict the scope for public sector organisations to be eligible to access the CJRS.
Nevertheless, the Employer Guidance provides that it may be appropriate for organisations to use the CJRS where organisations are “not primarily funded by the government and whose staff cannot be redeployed to assist with the coronavirus response”. Whilst it is feasible to consider it necessary to apply these principles for staff who are shielding and who may be furloughed, these issues should be addressed on a case by case basis and approached with caution, given the potential risk that employers who do furlough in these circumstances may not be able to recover the applicable 80% rebate from HMRC.
Whether publicly funded organisations are able to access the CJRS is likely to depend on a number of factors. These include the nature of funding that the organisation receives, whether staff are able to be re-deployed, whether the organisation is being funded specifically to provide services necessary to the COVID-19 response and the specific role of each employee potentially being furloughed.
How does the Procurement Policy Note 02/20 (“PPN02/20”) impact public sector employers?
The PPN02/20 provides guidance on providing relief to suppliers who may be in difficulty due to COVID-19. In accordance with this policy, contracting authorities (which includes central government departments, executive agencies, non-departmental public bodies, local authorities and NHS bodies) must ensure that they have reviewed their contract portfolio, identified suppliers they believe will be at risk due to COVID-19 and evaluated the most appropriate financial arrangements to implement until at least the end of June 2020 (whether in the form of certainty around continuing contractual payments to be provided or in agreeing with any specific supplier what actions they should take and whether that entails seeking other avenues of Government assistance). Contracting authorities will then need to put in place the most appropriate payment measures to support supplier cash flow. Contracting authorities are also encouraged to provide relief against current contractual terms with their suppliers (for example relief on KPIs and service credits).
The aim of the PPN02/20 is to allow organisations to provide their suppliers with certainty so that suppliers can have confidence that either they will continue to receive certain contractual sums or can look to seek appropriate Government assistance in order to ensure that they maintain their cash flow and manage staff appropriately. The guidance allows organisations to provide continuing payments on the basis that the suppliers are able to continue delivery of services and/or resume normal service delivery post the immediate COVID-19 response phase. Therefore, contracting authorities with suppliers who are potentially struggling during this crisis will need to ensure that they adhere to obligations set out in the PPN02/20 and have appropriate documentation in place to record this for governance and monitoring purposes.
Does the PPN02/20 apply to NHS bodies?
Yes. However, NHS bodies will also need to adhere to the additional guidance issued by NHS England on this issue and NHSE/I will have a greater input into any decision making process if NHS organisations believe that it may be appropriate for payments for suppliers (who may not be delivering critical COVID-19 response services) are warranted in line with PPN02/20 guidance.
What protection is available for Contingent Workers?
Under the PPN02/20, the Cabinet Office has issued guidance on how payments to suppliers of Contingent Workers impacted by COVID-19 should be dealt with where the party receiving the Contingent Worker’s services is a Central Government Department, an Executive Agency of a Central Government Department or a Non-Departmental Public Body (“the Contingent Worker Guidance”). The Contingent Worker Guidance provides that where Contingent Workers are unable to work as a result of COVID-19, they will be provided with the same level of financial support as those who are eligible for the CJRS. Suppliers are required to make arrangements for the requisite payments to be made to Contingent Workers. These payments will then be invoiced to the customer in the usual manner and must not additionally be claimed through the CJRS as this would amount to double recovery of Contingent Workers’ wages.
Again, in the context of the NHS and in respect of Bank staff (who are likely to be key workers required for the COVID-19 response) the specific guidance issued by NHSE should also be considered as it relates to self-isolation, sickness or shielding. Please refer to NHS Employers guidance and references to “bank staff” for more information.
Annual Leave
HMRC has now provided some clarity on this aspect of the scheme.
Will annual leave continue to accrue whilst employees are furloughed?
Yes. The Employee Guidance clearly states that employees will continue to accrue leave whilst they are furloughed.
Can employees take annual leave or be required to take annual leave whilst they are on furlough?
Yes. The Employee Guidance provides that employees can take annual leave whilst on furlough.
In accordance with the Working Time Regulations 1998 (“WTR 1998”), if an employer wishes to require employees to take annual leave whilst they are furloughed they must give twice as much notice as the length of holiday that they are requiring the employee to take. For example, if an employer wants an employee to take 5 days of holiday they will have to give the employee 10 days’ notice. This is subject to any provisions in the employment contract or relevant policies which may provide for longer notice.
If an employee takes annual leave whilst on furlough they should be paid their usual holiday pay in accordance with the WTR 1998. In practical terms, employers will be obliged to pay the additional sums over the grant received from HMRC to ensure that their employees receive their full contractual salary.
Can employees carry over any unused annual leave?
Under Regulation 13 WTR 1998, almost all workers are entitled to a minimum of four weeks annual leave each year. Regulation 13(9) WTR 1998 provides that this leave may only be taken in the leave year in respect of which it is due. However, the Working Time (Coronavirus) (Amendment) Regulations 2020 (“the WTR 2020”) have introduced two exceptions to this rule:
- Where it is not “reasonably practicable” for a worker to take some or all of the leave to which the worker is entitled as a result of the coronavirus (including on the worker, the employer and the wider economy or society), the worker shall be entitled to carry forward this leave; and
- This leave can be carried forward and taken into the two years immediately following the leave year in respect of which it was due.
This is likely to apply to those who have been self-isolating or are too sick to take holiday before the end of their leave year or to those who have had to continue working and could not take paid holiday.
Can employers restrict when employees take their annual leave?
Yes. The Employee Guidance provides that employers will have the flexibility to restrict when leave can be taken if there is a business need. For example, employers who are struggling financially may refuse to grant annual leave to employees who are on furlough leave if they are unable to pay the extra wages required so that the employee receives their contractual salary.
Under the WTR 1998 employers are able to require a worker to not take leave on a particular day provided notice is given in accordance with Regulation 15(4)(b) (for example, if an employee has 5 days holiday booked off, the employer must tell them 5 days before the holiday starts that it is cancelled). However, the WTR 2020 introduce a new provision that employers will only be able to refuse leave where the employer “has good reason to do so” (Regulation 13(12) WTR 1998).
Is it reasonable to force employees to take annual leave and how do I prevent staff all taking annual leave at the same time?
A balance should be struck between both employer/employee relations and the management of a business. Clearly if all employees save up their annual leave and want to take it at the same time, businesses may face difficulties with having too few staff available to work. Under the WTR 1998 employers have a statutory right to require employees to take annual leave and some employers will also have policies in place enabling the same. It will therefore be an employee relations and business management decision as to whether employers require their staff to take annual leave at a particular time.
One course of action may be asking staff to take a certain portion of their leave by a certain date. For example, for organisations whose holiday allowance runs from January to December each year, 75% of holiday entitlement may need to be used by the end of September (3/4 of the way through the year). This will still enable employees to have some flexibility as to when they take their holiday. It is also worth noting that from a health and wellbeing perspective, employers should be encouraging their workforce to take annual leave during this period to ensure they have the necessary rest from their working environment.
Looking into the Future - Potential Workforce Issues, Challenges and Litigation Risk for Employers
The Government has announced that the UK is past the peak of COVID-19 and it is moving its attention towards a lockdown exit strategy and re-opening the economy. Whilst there is still a long way to go before any sense of normality resumes for businesses, employers should start to be alert to some of the new challenges that may arise in the fallout of COVID-19.
The CJRS and Implied Consent – Practical Implications and Potential Litigation
The first litigation to arise out of the CJRS was the High Court ruling in Re Carluccio's Ltd (in administration) [2020] EWHC 886 (Ch) at the beginning of April 2020. Given the numerous iterations of the Employer Guidance and inconsistencies with the Direction, it is very likely that further litigation can be expected, particularly around the issue of implied consent.
Can employers imply employees’ consent to furlough leave?
The Employer Guidance states that employers should discuss with their staff and make any changes to the employment contract in respect of furlough by agreement. It also states that employers must confirm in writing to their employee that they have been furloughed. However, what happens when an employer writes to an employee proposing to furlough them and seeking their agreement but the employee does not respond?
Case law suggests that in particular circumstances, silence or inaction on the part of an employee can be equated with agreement or consent to a variation of the contract of employment. However, in Re Carluccio’s Ltd the High Court rejected the argument that the contracts of those employees who had not responded had been varied. The Court held that while there is case law to show that implied acceptance by way of conduct is possible, it was not established in these particular circumstances given that only a matter of days had passed since the variation letter (which required a positive response) was sent and that some employees had rejected the offer. The Court noted, however, that it might have been possible to infer agreement where no response had been received if:
- The variation letter had been phrased differently;
- The variation letter could be proven to have been received;
- More time had elapsed; or
- The particular circumstances of the non-responding employees had been explained in more "granular" detail.
Accordingly, whether agreement to be furloughed can be implied in the context of a lack of response from employees will depend on the particular circumstances of each case. We recommend exercising caution and seeking legal advice before furloughing staff who have not expressly agreed.
What are the practical implications and litigation risks where an employee does not expressly consent?
If an employee does not expressly agree to be furloughed and their employer nevertheless puts them on furlough leave, the following risks arise:
Clawback from HMRC: the Employer Guidance requires employers to make changes to the employment contract by agreement in a way that is consistent with employment law. When using the portal to make claims, employers are required to make a declaration that the claim is in accordance with HMRC’s published guidance. There is unlikely to be a forensic analysis of the circumstances of furlough by HMRC. However, the Government's Business Support: FAQs state that the Government will retain the right to retrospectively audit all aspects of the CJRS with scope to claw back fraudulent or erroneous claims. If an employee has not given express consent and implied consent is not established, HMRC may seek to claw back the money paid out in respect of that employee.
Breach of employment contract: an employee who did not expressly consent to furlough leave might seek to claim that their employer has breached the employment contract. This could entitle them to resign and claim constructive dismissal or alternatively not resign and claim unlawful deduction from wages (if their pay was not topped up to the full contractual amount).
Given the current job climate, it might seem unlikely that an employee would wish to resign. However, there are certain situations where an employee might seek to take advantage of their employer’s breach of contract in order to avoid disadvantageous terms of the contract that they may otherwise be bound by. For example, Directors and senior employees often have post-termination restrictive covenants in their contract of employment. Typically these seek to prevent them from taking advantage of confidential information, working for competitors or poaching clients or other employees for a set period (normally 6 to 12 months) after termination of their employment. If an employer breaches the employment contract by furloughing an employee without consent, arguably otherwise legitimate restrictive covenants in an employee’s contract would become unenforceable. This would enable the employee to resign, claim constructive dismissal and undertake activities that would otherwise be prohibited under the contract.
Lay-off and Short-time Working
The CJRS is currently due to end on 30 June 2020. Although the Government said that it will keep the scheme under review, we do not currently know whether or not it will be extended. When the CJRS does end, employers will need to consider how to manage their furloughed employees where there is insufficient work for them to do and/or pressure on wage costs. Lay-off / short-time working is a potential option for some employers.
What is lay-off and short-time working?
In brief, laying off staff means that an employer provides employees with no work and no pay for a period, whilst retaining them as employees. Short-time working means that an employer provides employees with less work and less pay (less than half a week’s pay) for a period whilst retaining them as employees.
There are statutory definitions of both of these terms under section 147 ERA 1996.
Why would employers use lay-off or short-time working in the COVID-19 pandemic?
Lay-off and short-time working are both temporary solutions to the problem of a business having no or less work. Where a business cannot maintain its workforce because its operations have been affected by COVID-19, an employer can save money when it lays off employees or puts them on short-time working, by not paying them or by paying them less for a certain period.
It is an alternative to redundancy, and therefore may be a more attractive option to both employers, who may wish to avoid making redundancy payments at a time when their business is financially unstable (although see below on statutory redundancy payments), and employees, who might struggle to find alternative employment in the current climate.
Typically, lay-off and short-time working are used in sectors such as manufacturing, and often for certain types of worker. However, recent economic downturns have seen lay-off and short-time working used more widely.
How can employers lay-off staff or put them on short-time working?
In order to use lay-offs or short-time working, there must be an express clause in the contract of employment making provision for these. It is very difficult to imply a right to lay-offs or short-time working.
It will be a breach of contract for an employer to lay-off employees or put them on short-time working without pay when there is no express or implied right to do so. This will entitle the employee to resign and claim constructive dismissal giving rise to claims for unfair dismissal and/or redundancy pay. Given the present job climate, employees may choose to not resign and instead claim unlawful deduction from wages.
The reality is that many employment contracts do not include lay-off or short-time working provisions. Given the current exceptional circumstances which employers and employees find themselves in, open communication and engagement is key. Employers should seek to discuss and consult with employees about the current situation and options available, including seeking agreement to incorporate a lay-off and/or short-time working provision into the contract. With well-managed communication, a contractual change may well be agreed to produce a solution which works for both employers and employees.
Do employers need to collective consult before laying-off staff / putting them on short-time working where a change of contract terms is required?
Where an employer is proposing to make 20 or more employees redundant within a period of 90 days, the collective consultation obligations under section 188 Trade Union and Labour Relations (Consolidation) Act 1992 (“TULRCA”) and the duty to notify the Secretary of State under section 193 of TULRCA (in Form HR1) will be triggered. Failure to comply with the collective consultation obligations may result in the employer being ordered to pay a protective award of up to 90 days' pay to each affected employee. Failure to provide Form HR1 to the Secretary of State is a criminal offence.
When employers start the process of changing terms of employment contracts in order to incorporate a lay-off / short-time working provision, they will not know with certainty whether the employees will agree to the proposed new terms. If the employees do not agree, then the employer may have to consider making those employees redundant. In light of the penalties identified above, if there is a risk that employees’ agreement will be difficult to obtain and that redundancies of at least 20 employees may be actioned, an employer should consider starting collective consultation (and providing Form HR1) at the outset of the process.
For more on collective consultation in the context of the COVID-19 pandemic, see “Redundancies” below.
How to choose which employees to lay-off?
If an employer only wishes to lay off some staff, then it may be necessary to go through a selection process to determine which employees are to be laid off. Employers must not make selection decisions that are discriminatory. As a matter of best practice, any selection should be reasonable and based on similar criteria to those used in a redundancy exercise. The criteria should be as objective as possible to avoid disputes and grievances.
Are employees entitled to SSP while they are on lay-off / short-time working?
To be eligible for SSP, an employee must have a day of incapacity for work. From 13 March 2020, those who are self-isolating in order to prevent the infection or spread of COVID-19 in accordance with public health guidance will be deemed to be incapable of work for these purposes.
The position of employees who have been laid off / put on short-time working is less clear given that a day of incapacity is a day on which the employee is incapable, by reason of illness, of doing work which they can reasonably be expected to do under that contract. Arguably, an employee who has been laid off or is on short-time working is not incapable of work by reason of illness but because their employer has exercised the right to lay them off under their contract. There does not appear to be any case law which addresses this issue. An employer considering an application for SSP in these circumstances may wish to contact HMRC in advance for clarification.
The employee concerned will also need to have average weekly earnings of not less than the Lower Earnings Limit (£120) based on the previous eight weeks in order to be eligible for SSP.
Do employers have to pay staff on lay-off / short-time working at all?
Employees may be entitled to guarantee payments if they are laid off or on short-time working. Guarantee payments are £30 per day for a maximum of five workless days in a 3-month period (i.e. maximum payment of £150 over 3 months).
If an employee is laid off or kept on short-time working for either 4 consecutive weeks or 6 weeks in a rolling 13 week period, the employee is entitled to resign and treat themselves as dismissed on the grounds of redundancy. This means a statutory redundancy payment is payable (provided they have the requisite two years of service). The employee must follow the statutory scheme set out in sections 147 to 154 ERA 1996 for claiming redundancy pay following lay-off or short time-working.
Is there a limit to how long employees can be laid off for?
There may be an express clause in the employment contract which deals with how long an employee may be laid off for. Although there is no statutory limit as such, the statutory scheme effectively gives employees the ability to determine whether they have been kept on lay-off for an unreasonable period, by allowing them to claim a statutory redundancy payment after the prescribed period has elapsed. It is therefore possible to imagine a scenario where an employee could claim to have been constructively dismissed where they have been laid off or kept on short-time working for an unreasonably long period without pay.
Redundancies
Due to the detrimental economic impact of COVID-19, many employers will be faced with the difficult decision as to whether or not they are able to maintain their current workforce. Despite the interim relief provided by the CJRS, it is anticipated that once the scheme is no longer in operation many employers will have no other option but to make their staff redundant. For some employers, this may even be required prior to the CJRS coming to an end.
Do employers need to consider furloughing employees before making them redundant?
Redundancy is a potentially fair reason for dismissal provided that the employer acts reasonably in treating it as a sufficient reason for dismissal. If an employer does not act reasonably, they may face unfair dismissal claims in the future.
The aim of the CJRS is to provide financial assistance to those who are currently unable to maintain their operations because of COVID-19. Therefore, if COVID-19 is the reason why an employer is considering redundancies, it may be deemed unreasonable for the CJRS to not be utilised before going down the redundancy route.
However, the Employee Guidance states that an employee can still be made redundant whilst on furlough which indicates that there may be circumstances where redundancy is still a reasonable alternative. For example, this could be where the requirement for redundancies has been triggered by something other than COVID-19. Further, for some employers the relief granted through the CJRS and other Government schemes may not be sufficient and therefore redundancies may be the only option.
Are employers required to carry out collective consultation?
As with all redundancy situations, if an employer intends to dismiss more than 20 employees as redundant, at one establishment, within a period of 90 days or less, they have a duty under section 188 TULRCA to consult with all appropriate employee representatives. If an employer is dismissing less than 20 employees, there is no requirement to collectively consult.
Where employers are planning to dismiss 100 or more employees, the consultation period must start at least 45 days prior to dismissal. Otherwise, the consultation period must be at least 30 days before the first dismissal takes effect.
The fact that an employer has closed its business does not mean it is no longer possible to collectively consult. Although these circumstances may make collective consultation difficult to manage, the duty triggered under section 188 TULRCA requires employers to consult with employee representatives as opposed to employees themselves. Therefore, if an employer is able to elect employer representatives the task of collective consultation may be easier to manage.
Can employers use the special circumstances defence?
The special circumstances defence provides that where “special circumstances” make it not reasonably practicable to consult in good time, or on the matters set out in section 188(2) TULRCA, or to provide the relevant information as required under section 188(4) TULRCA, the employer does not need to fully comply with all the collective consultation obligations.
What is deemed to be a “special circumstance” is interpreted very narrowly; it must arise from a sudden, out of the ordinary event which employers cannot anticipate. For example, in accordance with current case law, a business becoming insolvent is not in itself a special circumstance. Whilst the unprecedented and unique nature of the COVID-19 pandemic, may have initially presented as “special”, as the pandemic has now been ongoing for several weeks, and given the operation of the CJRS scheme, it is arguably much more difficult for employers to rely upon the special circumstances defence. This is likely to be an issue for determination by an Employment Tribunal in due course.
This is not an absolute defence in any event and employers must still take all steps towards compliance as is reasonably practicable in the circumstances. For example, an employer may not be able to comply with the full consultation time periods but they should still consider whether they can reduce the numbers of employees being made redundant and whether they are able to mitigate the consequences of such dismissals. In order to fulfil what is reasonably practicable, employers are likely to be required to explore new and different ways of consulting with union and employee representatives such as using online conference calls.
Can you consult with employees whilst they are furloughed?
Under the CJRS scheme, an employee must not undertake work for their employer. The latest iteration of the Employer Guidance now specifically states that employees who are union or non-union representatives may undertake duties or activities for the purpose of individual or collective representation of employees or other workers. This confirms that collective and individual consultation is permitted under the CJRS although employers must ensure that employees they are consulting with do not provide services to or generate revenue for the employer.
The Future
We have looked at issues arising out of COVID-19 to date. In the next edition of Employment Eye we will be analysing the likely impact of the pandemic as businesses and organisations slowly revert back to their “normal” way of working. This will include:
- Dealing with the likely increase in grievances;
- Sickness absences;
- Ensuring staff retention;
- Employee health and wellbeing;
- Changing expectations of flexible and agile working;
- Encouraging and enforcing workforce participation in the new ways of working (for example social distancing); and
- Likely additional employer obligations following Government announcements.
For further support and advice relating to the impact of Covid-19, please view our Covid-19 Advisory Service page.
