Coronavirus: Life after furlough leave explained

Partner Sue Dowling, head of Blandy & Blandy Solicitors’ employment law team, explains some of the issues facing employers at the end of the Coronavirus Job Retention Scheme, that has enabled organisations to place staff on government supported furlough leave.

As it is anticipated (at the time of writing) that the Coronavirus Job Retention Scheme (furlough scheme) will come to an end (following a winding down period), employers are having to consider now how they are likely to have to manage their businesses (and workforces) going forward into the summer and autumn, with a view to safeguarding the future viability of their organisations.

Here are some of the potential issues on which an employer may need to reflect in relation to the post-furlough employment landscape…

Employees returning to work after furlough

The basis on which employees return to work following a period of furlough leave will vary depending on the particular circumstances (primarily the legal basis on which the employees went on furlough, the current needs of the business and the particular circumstances relating to individual employees).

Employers need to be mindful of the legal position i.e. the employment contract between the organisation and its employees and the fact that it is not open to the employer to impose variations to the contracts unilaterally (i.e. without the true consent of the employees and without following the correct procedural requirements). If further changes to terms and conditions of employment are needed, the employer should bear in mind that the Collective Redundancy Consultation procedures may be triggered in certain circumstances.

Good communication with furloughed employees (as well as those who are not) will be crucial, particularly as individual employees’ circumstances may have changed (e.g. are they now having to self-isolate?). Further, if the employer does want employees to return and to agree to reduced working hours and/or pay, employees are likely to be more receptive to this if they are well-informed as to why the business is contemplating these measures.

The employer may also wish to reflect on whether it would prefer a furloughed employee to take some holiday leave before returning to the workplace and if so, how it should go about suggesting this to the employee, and whether it has the power to compel the employee to do so.

In addition to those considerations, there will be a whole host of practical issues to consider, to ensure that those returning to the workplace do so in a manner which is in accordance with any relevant legislation and also current Government guidance (e.g. in relation to social distancing, and/or the provision of PPE, and/or having completed a specific Coronavirus risk assessment).  The latter may well involve consideration of specific GDPR matters (relating to sensitive personal data, regarding health).

Ending an employee’s employment during furlough leave

An employer may decide that it must terminate an employee’s employment during their furlough period because of redundancy or another reason (e.g. possibly due to working for a competitor (in breach of contract) while on furlough).

When the CJRS was first announced, some guidance suggested that employment could not be terminated during furlough leave, by reason of redundancy. However, the guidance issued by the Government has since been updated and there is nothing in the current guidance to say that the employer cannot (on the face of it) terminate an employee’s employment while they are furloughed.

What is however clear is that an employer must not lose sight of the employee’s usual protections and rights, by virtue of his/her contract of employment; under the Employment Rights Act 1996 (for example, the right not to be unfairly dismissed), and/or under the Equality Act 2010 (not to be subjected to unlawful discrimination related to the protected characteristics).

An employer contemplating making redundancies will also need to consider the potential damage to the morale of the workforce and also any potential damage to the reputation of the business. In relation to the latter, employees may feel disgruntled and may voice their dissatisfaction, particularly where they were told before agreeing to a period of furlough leave on reduced pay, or before agreeing to work on a varied basis (rather than being furloughed, that the measures the employer was taking would help it to manage the business through the Coronavirus lockdown, and to save jobs.

Redundancy dismissals

Before terminating any employment, whether or not the employee potentially affected is or is not on furlough leave, the employer will need to ensure full compliance with Employment legislation to minimise the risk of any claims for compensation for wrongful dismissal, unfair dismissal and/or unlawful discrimination. Further, if the employer is proposing to make redundant 20 or more employees redundant in a period of 90 days, the Collective Redundancy Consultation, statutory requirements must also be undertaken before any dismissal is implemented.

As with any situation which may potentially lead to the cessation of employment, the employer will need to consider whether:

  • there is a potentially fair reason for dismissal;
  • what procedures should be implemented before taking the decision to dismiss, including proper consideration (where appropriate) about the ‘pool’ of employees who may be at risk of redundancy; what objective (non-discriminatory) criteria should be applied to provisionally select the employee(s) at risk, and what consultation should take place (and how) to potentially avoid the need to dismiss;
  • there are any factors which could expose the employer to an unlawful discrimination claim;
  • what contractual provisions will be applicable – for example any terms relating to payment in lieu of notice;
  • statutory entitlements, such as possibly, statutory redundancy payments will arise;
  • There are any ACAS procedures under any Statutory Codes of Practice which need to be followed.
Using CJRS grant for notice pay; payments in lieu of notice or statutory redundancy payments

As to how the necessary payments are funded, it is apparent from the Governments’ guidance that furlough grants under the CJRS cannot be used to pay statutory redundancy payments. The guidance does not expressly address the question of whether furlough grant payments can be used to pay the employee’s salary during their notice period.  Whilst this would suggest that the CJRS grant can be used for this purpose, there must be a risk that the HMRC might not regard it as within the purpose or ‘spirit’ of the Scheme.

The position in relation to whether a claim can be made under the CJRS for payments in lieu of notice (PILON) is clear. An Employer can only claim under the CJRS for existing employees and costs of employment can only be claimed if they relate to the payment of earnings to an employee during a period in which the employee is furloughed (and thus is still employed). As the employment of an employee who is paid in lieu of notice terminates, with the PILON following that cessation of employment, employee will have ceased to be an employee, and thus the PILON falls outside of the Scheme.

Redundancy consultation during furlough leave

A number of specific issues arise in the context of undertaking individual and/or collective redundancy consultation while all or some of the affected employees are on furlough.

Consultation practicalities

A key practical issue for an employer who wishes to undertake a consultation exercise while employees are on furlough leave will be whether it has in place effective methods of communicating with the furloughed employees. Many employers will be seeking to main regular contact anyway and may therefore be able to contact employees swiftly via email and/or platforms such as Zoom.

Where email will not cover the whole workforce, it may be necessary for the employer to rely on postal communications, which will inevitably lead to delays and affect the timescale for the consultation process.

Where the statutory requirements relating to Collective Redundancy Consultation are triggered, employers may find that they need to invest more time and resources (e.g. providing suitable IT equipment) in order to secure candidates who are prepared to stand as “appropriate representatives”.

Possible alternatives to redundancy dismissals

In the usual way, an employer should be considering alternatives to redundancy, such as short-time working and/or reduced pay. The statutory Collective Redundancy Consultation requirements may apply as these are triggered where an employer is proposing to dismiss as redundant 20 or more employees at one establishment within any period of 90 days or less, and ‘redundant’ means any dismissal for any reason or reasons not related to the individual concerned (so can cover where it is envisaged that contractual terms will be varied (if required) through the termination of existing contracts accompanied by the offer of new contracts on the varied terms).

Unfair dismissal and/or discrimination?

Where the employer is able to claim a grant in respect of an employee under the CJRS as an alternative to dismissal, can it ever be fair to dismiss that employee?

Whilst the furlough scheme does not prevent dismissals per se, in accordance with usual principles, the employer will need to show a potentially fair reason for dismissal and that, in all the circumstances, it acted reasonably in treating that reason as a sufficient reason for dismissing the employee. In relation to redundancies, for example, it may be that the employer can demonstrate that due to the down-turn of business (and the fact that little will change for the foreseeable future) postponing the redundancies until the CJRS is no longer available would just be postponing the inevitable.

An employer should also give careful consideration to the correct ‘pool’ of employees whose roles may be at risk of redundancy, and should not automatically limit the ‘pool’ to those currently on furlough leave. Consideration should be given to those working and those furloughed; interchangeable skills and where appropriate objective criteria should be applied before potentially selecting those at risk of redundancy. Whilst this is important to minimise the risk of any potential claims against the employer of unfair dismissal, it is as, or potentially more, important (in view of the uncapped nature of compensation awards, to avoid selecting those potentially at risk of redundancy, where inadvertently the selection could be tainted with unlawful discrimination (such as sex, race or disability discrimination).

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