Firms face furlough headache as jobs scheme rules published

Employers are facing a furlough headache after the Treasury published direction on the Coronavirus Job Retention Scheme (CJRS)

Whilst this was a welcome update ahead of portal opening earlier this week, for some employers it is going to cause even more difficulty as some of the rules appear to be different from what has previously been outlined in the guidance document.

Definition of 'furlough'

Most notably, the guidance previously stated that employees must be ‘notified’ that they are being furloughed. Employment lawyers across the country were quick to recommend that employers should seek agreement from their staff on being placed on furlough (rather than simply ‘notifying’ them that they were being furloughed) and to confirm any agreement in writing, as this is good practice from an employment law perspective. Many employers however will have followed the guidance and merely notified their staff.

 The direction from the Treasury now states that an employee will only be furloughed if:

a)     The employee has been instructed by the employer to cease all work in relation to their employment;

b)    The period for which the employee has ceased (or will have ceased) all work for the employer is 21 calendar days or more, and

c)     The instruction is given by reason of circumstances arising as a result of coronavirus or coronavirus disease.

Note that there is no requirement now that they would otherwise be made redundant.

The direction later states that an employee will only be deemed to have been ‘instructed’ by the employer to cease all work in relation to their employment if the employer and employee have agreed in writing (which can be in electronic form such as email) that the employee will cease all work in relation to their employment. This development will be concerning to employers who have placed employees on furlough without getting express agreement in writing.

Further, the direction seems to suggest that the written agreement must expressly instruct the employee to cease all work in relation to their employment. We suspect that some employers who have got agreement in writing may not have gone so far as to expressly state this in the letter.

The guidance has now been updated, and since 20^th April has stated that any changes to the employment contract must be made by agreement, and that employers must confirm in writing to their confirming that they have been furloughed to be eligible for the grant. However it goes on to say that the employee does not need to provide a written response. So it seems that what is expected is that the employer will be able to evidence a written record of what was agreed with the employee.

It is concerning that this nuance missing from the original guidance may mean that those employers who have taken steps to utilise the scheme quickly may fall foul of the rules, in that they may have employees who do not meet the eligibility criteria for the scheme. It is not yet clear what, if any, checks HMRC will put in place to review eligibility of claims at the time the claim is made. But they have made it clear that they intend to audit some claims retrospectively and so it seems likely that some claims will be deemed to be ineligible in the future if HMRC undertake an audit. This could mean that some businesses are forced to repay the grant.

Holiday pay

Also, notably, there is no mention at all of how annual leave should be treated Holidays (at least the 5.6 days statutory element) must be paid at 100% of normal pay.

The guidance as updated on 17 April 2020 says that holidays can be taken on furlough leave and reclaimed up to 80%.

Unpaid leave

The guidance and direction are contradictory and again further clarification is required. The guidance states that an employer can furlough employees who started unpaid leave after 28 February 2020.

The direction states that no claim to CJRS may be made in respect of an unpaid sabbatical or other period of unpaid leave of an employee beginning before or after 19 March 2020 (whether agreed or otherwise arranged conditionally or unconditionally on, before or after that day).

It is really unhelpful for the employers to have to deal with constantly shifting sands.

Employment law support

We have only highlighted a couple of the issues raised by the direction here. The full direction to HMRC from the Treasury is available here. Please contact our Employment Team at employmentlawdepartment@acandco.com if you require any advice on anything mentioned in this article.