Important and interesting legal stuff to understand about furloughing
Guidance is guidance. It is not law.
The government guidance is generally excellently written and usually always worth referring to in the first instance. However, furlough scheme guidance is not employment law guidance. And guidance is not law.
With that in mind, the following becomes important.
Furlough payments are not wages.
All employment contracts are based on a simple bargain: the employee makes himself available to do the agreed work; the employer pays wages in return. As Tommy Cooper might put it: “Work, wages….. No work, no wages…. (Ahh…)”
‘Furlough’ payments are, unfortunately, referred to in guidance as being ‘wages’. In fact, they are simply grants to workers made under the Coronavirus Job Retention Scheme administered through HMRC and the employer payroll. The one thing they are not is wages, at least not in the sense of the employment contract and centuries of legal tradition.
The Scheme is simply administration of a grant fund allocated to a worker that the employer tells HMRC is furloughed. In one transaction, the employer who normally pays wages to the employee, pays no wages but instead makes a payment equivalent to 80% of normal wages and processes the payment through its PAYE system so that HMRC have full sight. In another transaction, HMRC reimburses the employer that 80% payment.
The furlough payment which the employer is helping to administer has nothing directly to do with work, nor the contract of employment, nor normal employment rights.
Because furlough payments are a new invention, no employment contracts state that the employee has a right to be laid off so as to receive furlough payment. No new law has been made stating that employers have to lay off anyone in order to process furlough payments. To the extent any obligations arise, these are decided by reference to the terms of the contract of employment, whether written or implied.
Lay Off is not Furlough
In a similar theme, being ‘laid off’ work is a phrase used in the Employment Rights Act 1996 to describe a situation where, after a period of 4 weeks being given no work and no pay, an employee has the right to ask his employer for a redundancy payment. It is a phrase, therefore, relating to the contract of employment.
Being ‘furloughed’ does not relate to the contract of employment. It relates to administration of a grant under the Scheme.
Therefore, although an employee might agree to being ‘furloughed’ and the employer processing the furlough payment, this is not necessarily the same as agreeing to be laid off and to wave entitlement to full pay under the contract of employment.
Of course, some employment contracts specifically allow the employer the right to express right to lay off its staff (as is quite common in manufacturing industries). However, if the contract does not allow this, laying off will normally be in breach of contract and so agreement will be necessary.
As for agreement of staff to be furloughed but without being laid off, this might turn out to be satisfactory. However, until we have sight of details of the scheme and an employer can be certain that its employees will be covered, there could turn out to be some very nasty surprises. What proof might HMRC require that the particular business has had “operations been severely affected by Coronavirus (Covid-19)”? We just don’t know.
The result of this is that ‘furlough’ letters poorly drafted today may leave the employer exposed to significant claims for the difference between normal pay and the furlough pay, and potentially the whole amount of normal pay regardless of the furlough payment. Where there are many employees, or just one or two highly paid employees, there is potential for very high value claims. And although you might think the Courts will have sympathy where there are opportunistic claims, the Court may well have its hands tied and have to uphold the contract.
Social Distancing is not Isolating
Staying on the theme of contrasting phrases…
Isolating = incapable of work = sick pay
If employees are ‘isolating’ themselves following government advice from relevant health agencies (Public Health England / Wales / Scotland), they are deemed to be incapable of work for purposes of the statutory sick pay scheme. In practice, they will likely be be deemed incapable of work under their employment contract also.
However, ‘isolating’ is only advised in certain circumstances and for certain short periods: 7 days where the individual has symptoms of the virus, 14 days where a member of the household has symptoms.
Social distancing = capable of work = no pay
‘social distancing’ is a lesser step than isolation. Although social distancing was initially, and remains, most strongly advised for individuals at increased risk (people age 70+, with underlying health conditions or who are pregnant), we are all doing it. Following social distancing guidance does not of itself give any employee a right to stay away from work. It is the requirement to isolate, when it arises, that entitles and requires the employee to remain away from work.
It follows that an employee who chooses to be absent from work to stay at home when it is not required by guidance has no right to SSP or contractual sick pay. The absence may usually be unauthorised and disciplinary measures could follow.
(The practical steps defined by ‘isolation’ and, less strictly, by ‘social distancing’ should by now be familiar to everyone. If not, follow links below to government guidance.)
Health and Safety is relative
Following from all of the above, the employer’s H&S duty generally is to reduce risk as far as practicable. However, observing all guidance on social distancing at work, for example a 2m separation, may not always be practicable in the NHS, in construction and in many workplaces.
Laws are being introduced, in stages and as the government thinks necessary, to close many workplaces, such as in hospitality and retail already, with offences being committed if those laws are breached. They are not yet introducing new laws restricting civil liberties that force employees to go into work or to force them to leave work. Decisions are being made instead by reference to contractual obligations and influence of financial incentives through availability of furlough payments.
So as long as H&S duties are being carried out, employees may have difficulty refusing to attend work when not laid off. If the employee doesn’t attend work, the employer doesn’t have to pay wages. Assuming the employer is also not obliged to designate them for furlough, the employer could even take disciplinary action and dismiss.
If a dispute arises, who is in the stronger position will depend on the facts in any individual case.
Do get in touch if you require advice on any issues raised above.
https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19
https://www.acas.org.uk/coronavirus
The content of this webpage is for information only and is not intended to be construed as legal advice and should not be treated as a substitute for specific advice. Jackson Osborne accepts no responsibility for the content of any third party website to which this webpage refers.