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    The Fallout from Furlough

    Summary

    Employment Associate Fiona Mendel and Trainee Solicitor Libby Morris consider the impact of the CJRS and life after furlough for employers.

    The Government’s Coronavirus Job Retention Scheme (CJRS) opened its online portal on the morning of Monday 20 April 2020. In its first 24 hours of operation, 185,000 businesses submitted claims in respect of 1.3 million employees reported as furloughed. 67,000 of these claims were made within the first half an hour of the portal going live. According to the Treasury, the system can process up to 450,000 applications an hour, which a few weeks ago was hard to ever have imagined. The CJRS has thus been embraced by businesses, regardless of size and sector, amidst the continuing uncertainty of when they may be able to return to operating as normal, whatever the ‘new normal’ may look like.

    Once the COVID-19 pandemic is under control and (some) organisations are permitted to resume normal operations, employers will likely have to contend with a number of new issues.  Businesses across the country are working entirely remotely and are expecting to have to continue to do so for some time yet, and many employees, having adjusted to the flexibility of homeworking, may be reluctant to give that up. Those businesses that were previously hesitant to implement flexible working may see a rise in requests from employees wanting to work from home on a more regular basis going forward. Our Head of Employment Helen Crossland has previously examined the effects and practicalities of such requests in her article Coronavirus and Homeworking.

    The CJRS is currently running until the end of June 2020, at which point employers will no longer be able to claim for employees’ wages (unless the scheme is further extended). Yet many employees may feel anxious about returning to the workplace, particularly where they take public transport to get there. Businesses will need to be mindful of the fact that an implied term exists in each employment contract to ensure reasonable steps are taken to protect the health and safety of their employees, and those that refuse to work because they perceive there to be a threat of danger are likely to be afforded some protection, especially those that are elderly or vulnerable.  Perhaps this is when the newfound flexibility of agile working will be relied on most by employees who have shown they can continue to perform their role from home, just as effectively and if not more productively than they did before the pandemic. Employers therefore need to be cautious about insisting that staff return to work immediately after the restrictions are lifted; a certain level of planning regarding a phased return is likely to be inevitable.

    Further challenges may lie ahead for those employers who have furloughed some, but not all, of their employees during this time. Employees must not undertake any work at all while they are furloughed to be eligible for the scheme, resulting in some employers having had to agree short-time working with employees they do require to carry out certain roles, but who are not currently needed on a full-time basis. An unwanted effect of this may be to foster resentment between those employees who are working hard to keep their employer’s business running smoothly, and their colleagues who are not working whilst remaining on 80% of pay (and possibly more if their employer has opted to top up the Government grant). This will be particularly relevant for employers who have asked staff to agree to a 20% pay cut in order to further save costs in the current climate. While staff are likely to appreciate that the aim of a pay reduction is to protect the business from having to consider alternatives such as making redundancies, those whose pay has been cut may struggle with the idea that their colleagues will be paid the same amount to remain offline at home.

    Many businesses will employ a number of individuals in the same role with the same responsibilities, and will have chosen which of those employees to furlough and which to keep on at work. Those who have been placed on furlough leave may perceive this as though they are more disposable and that, should their employer be faced with the need to make redundancies, they may be first in line. Employers will need to tread carefully when selecting employees at risk of redundancy once the CJRS has ended, and recognise that any redundancy process is entirely separate to the furlough process. The selection criteria must be fair and applied consistently to all relevant employees, so as to avoid the risk of any claims of unfair dismissal. If it includes those who have been less willing to accept measures proposed by the employer, it may leave the business open to more scrutiny from such employees.

    Employers will also need to navigate the task of managing annual leave effectively. HMRC have recently updated their guidance to the CJRS to provide some welcome clarity - employees will continue to accrue annual leave as per their contract of employment whilst they are furloughed and, although an employee can take annual leave while furloughed, the employer will have to top up the CJRS grant so that the employee receives 100% of their usual pay during any period of annual leave. Most employees, whether furloughed or not, will not be wanting to take annual leave at a time when they are confined to their homes and unable to socialise with family and friends. As a result, it is anticipated that once life returns to normal, there will be an influx of requests by employees who want to take their annual leave at the same time as each other. This is likely to be at a time when employers need their workforce the most, to pull together and jump-start the recovery of the business. Employers may have to consider annual leave requests on a ‘first come, first served’ basis, and decline requests which would leave the business short staffed at any one time. The CJRS guidance, in line with general employment law principles, reassures employers that they will have the flexibility to restrict when leave can be taken if there is a business need. That applies for both the furlough period and what they have termed the “recovery period”. Despite The Government’s new legislation allowing employees to carry over up to 4 weeks’ paid holiday into their next two holiday leave years, many are bound to be left disappointed by having leave requests declined, potentially causing further resentment in the workplace and within the employer/employee relationship.

    Should you have any questions regarding the above, or need any employment related legal advice, please contact Seddons’ Head of Employment, Helen Crossland, at helen.crossland@seddons.co.uk, or 020 7725 8034 or Associate, Fiona Mendel at fiona.mendel@seddons.co.uk on 020 7725 8033.

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