Employment Eye September 2020
Welcome to Part two of Bevan Brittan’s COVID-19 edition of Employment Eye.
Since publishing Part one of our COVID-19 edition in May 2020, the impact of COVID-19 on workforce and employment law issues has evolved significantly. The flurry of new legislation and Government guidance that we saw at the beginning of the pandemic has slowed, increasing numbers of employees are returning to work, and most organisations have now had time to adjust to the “new normal”.
However, challenges around workforce management and employee relations remain. Many employers are still grappling with the “flexible furlough” scheme and, with the end of the scheme looming, some organisations will be implementing structural changes and considering whether redundancies are required. The increasing return of staff to the workplace also presents challenges around staff who refuse to attend work.
In this edition, we discuss how the rest of the “flexible furlough” period will play out and the potential contractual issues which may arise as the Coronavirus Job Retention Scheme (“the CJRS”) comes to an end. We also take a look at the statutory and Government guidance changes that employers will need to be aware of and the challenges that carrying out redundancies in the current climate may bring for employers. Finally, we consider how employers can manage staff who refuse to return to work in a number of contexts.
Flexible Furlough Scheme
Under the original CJRS, employers could not require their employees to work whilst they were on furlough. However, from 1 July 2020, changes were made to the scheme which allowed employers to bring furloughed employees back to work for any amount of time on any work pattern whilst still receiving a grant for the hours an employee did not work. This flexibility has been welcomed by many organisations who are slowly increasing their workforce capacity as operations begin to pick up again.
Alongside the changes to the CJRS, we have seen an abundance of Government guidance, policies and legislation setting out how it operates. Although notably very complex, the “Coronavirus Act 2020 Functions of Her Majesty’s Revenue and Customs (CJRS Direction)” (“the Third Treasury Direction”) published on 26 June 2020 sets out how the CJRS and flexible furlough operate between 1 July and 31 October 2020.
Further details of the changes which were introduced on 1 July 2020 can be found in our article here.
When will the CJRS close and what contributions are employers required to make?
The scheme will remain open until 31 October 2020 and employers will need to be wary of the increased contribution they will need to make to their employees’ wages over the coming months. In addition to employer National Insurance and pension contributions, employer will be required to pay:
- From 1 September – 10% of employees’ pay, capped at £312.50; and
- From 1 October – 20% of employees’ pay, capped at £625.
As many furloughed employees will have returned to work on a part-time basis, the new caps will be proportional to the hours not worked by each employee.
The “Changes to the Coronavirus Job Retention Scheme” policy paper updated on 1 July 2020 makes it clear that employers are required to pay the additional 10% or 20% contribution towards salary costs; this is not voluntary. The Third Treasury Direction confirms this and, although difficult to follow, the provisions operate so that an employer’s CJRS claim would not be valid if an employee does not receive the 80% of their reference salary for the furloughed hours.
What if an employer has claimed more grant than they needed from HMRC?
HMRC have made it clear that they will not hesitate to take action against fraudulent claims under the CJRS. They have also retained the rights to retrospectively audit claims made under the scheme and may claw-back fraudulent or erroneous claims. We anticipate that when the CJRS closes at the end of October 2020, HMRC may focus more resources on the claw-back of funds from fraudulent or erroneous claims.
Under amendments to the Finance Act 2020, HMRC now also have the power to raise income tax assessments to recover CJRS payments from recipients who were not entitled to them, or where grants received under the CJRS have not been used to pay furloughed employees.
On 29 July 2020, the Government published guidance on what to do if an employer has claimed too much or not enough under the CJRS. This states that if an employer has over-claimed a grant and has not repaid it, the employer must notify HMRC by the latest of either:
- 90 days after the date the employer received the grant it was not entitled to;
- 90 days after the date the employer received the grant that it was no longer entitled to keep because circumstances changed; or
- 20 October 2020.
If the employer does not do this, it may have to pay a penalty.
Can an employer keep employees on furlough leave after the CJRS ends?
Yes, provided employees agree to this. However, as the CJRS will have ended the employer will no longer receive any payments from HMRC for salary and wage costs so this is likely to be an unattractive option for most employers.
Can an employer reduce an employee’s pay when they return from furlough?
Yes, provided employees agree to any changes being implemented.
Some contracts of employment contain flexibility clauses which permit employers to make changes to an employee’s rate of pay unilaterally (i.e. without agreement). However, flexibility clauses concerning pay are both rare and narrowly interpreted and are therefore unlikely to be a realistic option for most employers.
Without a flexibility clause, employers will need to reach agreement with their employees for any proposed change to their contract of employment. This could involve reduced pay, reduced hours or for an employee to remain “on furlough” with no pay at all. For many employees, these options may be a better alternative to redundancy.
What if employees do not agree to proposed changes to their pay?
If an employer is unable to reach agreement with their employees’ about changes to their pay, the employer could impose a change of terms and rely on an employees’ implied agreement to the change by their action in continuing to work. However, employees may continue to work while making it clear they are doing so under protest which could subsequently give rise to potential claims such as breach of contract or constructive dismissal.
If you intend to dismiss any employees who do not agree to the proposed change, or force the change through by dismissing and then re-engaging employees, collective consultation may be triggered. See below for more detail on this.
From 31 October 2020, the CJRS will close and payments for employee wages under the scheme will no longer be available. As such, one of the biggest challenges employers are likely to face over the next coming months is whether or not organisational restructure and redundancies are required.
Although the scheme will remain open until the end of October 2020, in light of statutory provisions governing timescales for the redundancy process, employers will need to start considering the impact that the scheme closing will have on their cash flow, and whether redundancies will need to be made, well in advance of the end of October 2020.
When does an employer need to carry out collective consultation?
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 Trade Union and Labour Relations (Consolidation) Act 1992 (“TULRCA”) to consult with all appropriate employee representatives. There is also a duty to notify the Secretary of State under section 193 of TULRCA (in Form HR1). If an employer is dismissing less than 20 employees, there is no requirement to collectively consult.
Consultation must start in “good time” to allow a period for relevant discussions. 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. Given these timescales, employers will need to start considering now whether redundancies will need to be made as staff return from furlough.
Can an employer carry out the consultation process whilst an employee is on furlough?
The “CJRS Employee Guidance” states that whilst on furlough, an employee may still undertake union or non-union representative duties and activities for the purpose of an individual or collective representation of employees or other workers. However in doing this, they must not provide services to or generate revenue for, or on behalf of their employer’s organisation or a linked or associated organisation. This position is reiterated in the “CJRS Employer Guidance”.
Although the guidance does not specifically refer to individual and collective consultation for the purpose of redundancies, we are of the view that consultation for the purpose of redundancies falls within this scope as it does not generate revenue for the organisation and therefore permissible whilst an employee is on furlough.
Can an employer use grants received under the CJRS to pay the notice period of an employee on furlough?
On 10 July 2020, the CJRS Government guidance was updated to clarify the position in relation to notice periods. The guidance now states that an employer can continue to claim grants for a furloughed employee who is serving a statutory notice period. However, the grants cannot be used to fund redundancy payments.
Despite this, employers will need to carefully consider the reputational risks of using the CJRS to pay for the notice periods of employees who are being made redundant, given that the scheme was implemented to retain staff during coronavirus. For some employers, due to cash flow issues, there may be no alternative.
Can an employer carry out the consultation process remotely?
As many employees are working from home, self-isolating or on furlough, consulting with employees for the purpose of making redundancies is likely to raise some challenges. Despite these potential difficulties, employers must still undertake a consultation process before any redundancies are made.
Although the preferred process would be to carry out consultation face-to-face, there is no legal requirement to do so. As such, consultations can take place over the phone or video conference if both parties agree to it and there is a clear need to do so.
If collective consultation duties have been triggered, the employer’s duty is to consult with representatives of affected employees. Once these representatives have been nominated, an employer’s consultation obligations will become much easier to manage.
Employers will also need to be wary of additional practicalities likely to arise when undertaking consultations remotely. For example, employers will need to ensure all participants have access to suitable IT equipment with video conferencing facilities available. They may also need to facilitate arrangements for employee or union representatives to be able to liaise and communicate with their colleagues or members remotely. These practicalities may require IT support to be provided to participants and may also require employers to factor in longer timescales for the consultation process.
How should an employer calculate a week’s pay for the purpose of notice pay and redundancy payments for an employee who has been furloughed?
On 31 July 2020, the Employment Rights Act 1996 (Coronavirus, Calculation of a Week's Pay) Regulations 2020 (“the Pay Calculation Regulations”) came into force. For employees with normal working hours (which do not vary week to week), if the “calculation date” for statutory redundancy or notice pay falls on or before the CJRS comes to an end (31 October 2020), the Pay Calculation Regulations require an employer to calculate the amount payable with reference to an employee’s normal week’s pay, as opposed to their reduced furlough pay.
The Pay Calculation Regulations have similar provisions for employees whose pay varies with the amount of work done, the time of work done or those who have no normal working hours. In these situations, the Pay Calculation Regulations apply where the period used to calculate the amount payable includes a week where the employee was furloughed.
Accordingly, if employers use payments received under the CJRS to pay for an employee’s notice period, they will still need to “top up” this amount so the employee receives their full rather than reduced furlough pay.
Employee Refusal to Return to Work
What considerations does an employer need to take into account if an employee refuses to return to work?
If an employee refuses to return to work due to fears about COVID-19, the employer should consider whether the employee can carry out their duties by working from home. If that is the case, then this may be the practical solution.
If an employee cannot fulfil their duties whilst working from home, then there are a number of considerations to be taken into account which may affect how the employer handles the situation. For example, employers should consider whether there are any discriminatory issues in relation to a blanket policy requiring employees to return to work. In addition, if an employee falls into a “clinically vulnerable” category, there are other potential risks. We set out advice in relation to discriminatory issues and clinically vulnerable employees separately below.
Employers should also consider their health and safety duties. It is possible that an employee’s refusal to attend work due to a belief that they will be at risk of contracting COVID-19 could be protected under section 100(1)(d) Employment Rights Act 1996 (“the ERA 1996”). This protects employees from dismissal on the grounds of absence from work if the absence was due to a reasonable belief that attending work could put them in serious and imminent danger, and they could not reasonably have been expected to avert that danger. Disciplinary action short of dismissal, such as withholding pay, could be caught under the equivalent detriment provision in section 44(1)(d) of the ERA 1996. The employee does not need to demonstrate that such a danger actually existed; the question is whether they reasonably believed that attending work would put them at danger. This highlights the importance of engaging with employees in terms of the measures taken to minimise the risk. This is particularly important in workplaces where there is perceived to be a high risk of contracting COVID-19, such as health and social care settings.
What can an employer do if an employee refuses to return to work due to fear of COVID-19?
If the considerations outlined above have been taken into account and the circumstances are such that the employee can reasonably be expected to attend work, then instructing an employee to attend work may amount to a reasonable management instruction. If an employee refuses to follow a reasonable management instruction then the employer could take formal disciplinary action. However, we recommend seeking to resolve the situation informally in the first instance, by engaging with the employee about their specific concerns, and seeking to identify any reasonable steps that could be put in place in order to assist them to attend work.
We strongly recommend that employers seek specific legal advice before disciplinary action is taken in relation to an employee who refuses to attend work.
What pay is an employee entitled to if they refuse to return to work?
If an employee refuses to follow a reasonable management instruction to attend work and their absence is unauthorised then the employee would likely not be entitled to pay. However, as outlined above, the context of the refusal needs to be closely considered before withholding pay as this could amount to an unlawful detriment for refusal to work on health and safety grounds.
What should an employer do if an employee who refuses to attend work falls within a clinically vulnerable category?
An employer should undertake appropriate risk assessments in relation to the employee’s particular vulnerability and the measures that can be put in place in the workplace in order to reduce the risk of them contracting COVID-19.
Since 1 August 2020, the Government paused “shielding” and the current advice is that clinically extremely vulnerable employees can go to work, as long as the workplace is COVID-19 secure, but that they should carry on working from home if they can.
A return to work following shielding is likely to require a similar process to a return to work from long term sick leave in light of the lengthy absence from work and ongoing risk of COVID-19 infection. Employers should carry out a risk assessment in relation to the particular employee, identify any potential risks and consider whether adjustments to the employee’s role or workplace should be made.
If the workplace is COVID-19 secure and the employee cannot work from home, then it may be a reasonable management instruction to require the employee to work and refusal to attend work could amount to disciplinary action. However, employers should consider their position carefully before requiring an employee to come into work if they fall into one of the clinically vulnerable categories, as it could result in a claim for constructive dismissal, discrimination or a health and safety related detriment/automatically unfair dismissal.
What should an employer do if an employee who refuses to attend work is disabled?
There may be employees who are suffering from illnesses which constitute a disability under the Equality Act 2010 and who are more likely to suffer serious illness if they contract COVID-19. If the reason that an employee refuses to work is because of a disability which puts them into a high-risk category, then disability discrimination issues may arise. These are summarised briefly below:
- Indirect discrimination – an employer’s provision, criteria or practice (“PCP”) of requiring all employees to attend work could be indirectly discriminatory against disabled employees. The employer should consider whether the PCP can be justified as a proportionate means of achieving a legitimate aim, such as maintaining staffing levels or frontline services.
- Discrimination arising from disability – where an employee refuses to attend work because of their disability and the employer treats them unfavourably because of this, for example by not paying or dismissing them for unauthorised absence, the employee could have a potential claim. The employer may escape liability if the treatment of the employee was a proportionate means of achieving a legitimate aim.
- Reasonable adjustments – an employer may be liable for a failure to make reasonable adjustments if it does not facilitate a disabled employee’s request to work from home during the COVID-19 pandemic. Where an employee’s role is not suitable for homeworking, an employer should consider what reasonable adjustments can be made to enable them to attend work.
Where a disabled employee refuses to attend work because they are concerned about their increased risk because of their disability, we recommend that medical advice is sought from Occupational Health or the employee’s GP in order to identify the potential risks and to see what adjustments should be made to assist the employee to continue to work.
What should an employer do if an employee who refuses to attend work is pregnant?
Employers have specific statutory health and safety duties in relation to pregnant employees. This includes 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.
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. We strongly recommend seeking specific legal advice before requiring pregnant employees to attend work or taking any disciplinary action against a pregnant employee who refuses to attend work.
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