Furlough leave: updates on the Coronavirus Job Retention Scheme

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Furlough leave: updates on the Coronavirus Job Retention Scheme

Published 11 June 2020

Furlough continues to be a significant topic for all employment practitioners. On 29 May 2020 the Chancellor announced that flexible furlough would be permitted from July and that employers would be required to bear some of the financial cost from August 2020 (click here for our recent alert summarising the changes). We are expecting detailed guidance on 12 June and will update you again once we have that.

Returning from family leave and furlough

As detailed in our alert on 1 June, the CJRS will close to new entrants from 30 June. From this point onwards, employers will only be able to furlough employees that they have furloughed for a full 3 week period prior to 30 June, meaning that the final date by which an employer can furlough an employee for the first time is the 10 June.

On 9 June the Government announced that there will be an exception to this rule for parents on extended family leave who return to work in the coming months and have not have been furloughed before the deadline because they have been on leave. Such employees will be eligible for furlough even after the 10 June cut-off date as long as their employer has previously furloughed other employees.

This exception applies to people on statutory maternity and paternity leave, adoption leave, shared parental leave, and parental bereavement leave.

Treasury Direction

Just before the announcement regarding flexible furlough, the Government issued a new Treasury Direction on 22 May amending the legal framework for claims under the CJRS, reflecting the extension to the CJRS until the end of June and clarifying some provisions within the original Direction, which was published on 15 April (presumably we will also see a further Treasury Direction on or after 12 June reflecting the extension of the scheme to October, including the provisions relating to flexible furlough).

The new Treasury Direction resolves many of the inconsistencies between the HMRC CJRS Employer Guidance and the 15 April Direction, at least in respect of claims after 22 May 2020. The most significant change in the new Treasury Direction is the amendment to the requirements for placing an employee on furlough. The original version of the Direction caused concern because it appeared to conflict with the HMRC Employer Guidance and stated that an employer could only validly furlough an employee (and hence claim their recoverable wage costs under the Scheme) where the employee “agreed in advance and in writing” to the “cessation of work” (click here to see our previous alert). The Treasury Direction was published after the HMRC Employer Guidance and as a result many employers had not sought explicit written agreement from employees. The updated Direction now confirms that the employee’s agreement does not have to be in writing, provided that the agreement reached with the employee is confirmed in writing by the employer (which can be by email). Therefore, provided employers have written to their employees to confirm that they have been furloughed and the terms on which furlough terms have been agreed, employers should (subject to each individual circumstance) have complied with the new Direction. The agreement can be reached with the employee directly or with the trade union as a collective agreement. There does not have to be employee agreement in writing. However, if written agreement is not obtained from the employee or a trade union on behalf of the employee the furlough letter should seek implied agreement. For example, it should state a failure to object by a certain date would indicate the employee’s agreement to the changes to the employees terms and conditions and in particular the furlough leave. It should be noted that implied agreement requires very clear and explicit language so that it is clear to the employee that a failure to respond will be taken to be agreement.

In summary, the new Direction states eligibility to make a CJRS claim will be satisfied if:

  • The employer and employee have agreed that the employee will cease all work in relation to employment (this can also be made by means of a collective agreement between employer and trade union);
  • That agreement / collective agreement specifies “the main terms and conditions upon which the employee will cease work”;
  • The agreement is incorporated (expressly or impliedly) into the employee’s contract;
  • The agreement is in writing or is confirmed in writing by the employer (this can be in electronic form); and
  • The employer keeps the agreement / collective agreement / confirmation until at least 30 June 2025.

What does this mean for employers?

The first Treasury Direction applies to claims submitted before 22 May. There may therefore, still be a problem for employers who did not get explicit agreement from employees to furlough leave prior to 22 May. However, there are some technical arguments that employers could try to use if a claim for a grant is challenged including the fact that the official government guidance did not require explicit written consent from employees. Employers may also be able to rely on the new/second Treasury Direction in respect of past claims (if those claims complied with all the provisions of the new Direction for any claim made after 22 May even if the claim relates to a per 22 May period).

In any event the new/second Treasury Direction is welcome clarification for employers. It is important to note, however, there is still a requirement for at least implied or verbal agreement from the employee, and for a written record to be made of that agreement. Employers should ensure that all the above requirements are satisfied for employees furloughed after 22 May and to provide written confirmation of the agreement for those already furloughed, if this has not yet been done. The new/second Treasury Direction does not address the new flexible furlough scheme that will start on 1 July. It is to be assumed a third Treasury Direction will be issued. In the meantime employers need to prepare for the new flexible scheme and should note that current, properly drafted agreements for furlough will prevent employees from working. If the employer wishes an employee to consent to working part time from 1 July they will need agreed variation from employees in advance of 1 July.

Authors

Ceri Fuller

Ceri Fuller

London - Walbrook

+44 (0)20 7894 6583

Joanne Bell

Joanne Bell

Manchester

+44 (0) 161 934 3179

Zoë Wigan

Zoë Wigan

London - Walbrook

+44 (0)20 7894 6564

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