March 25, 2020

The Government’s  Coronavirus Job Retention Scheme, announced on Friday 20th March 2020, was launched to support businesses during the COVID-19 pandemic.   A key part of the scheme is the ability for employers to designate employees as ‘furloughed workers’ and claim up to 80% of their salary from the government – however, this is caused a fair amount of confusion.

A lot of this confusion is likely to have been caused by the Government referring to furlough leave as an alternative to employees being ‘laid off’. These are terms are commonplace in America, where there is no statutory scheme relating to employees who are placed on a period of ‘lay off’.  In the UK ‘lay off’ and ‘redundancy’ mean very different things.

Many employers in the UK have employment contracts  that entitle them to put their employees on a period of ‘lay off’ or short time working.  Employees are not paid during such a period of lay off but do have the right to claim ‘guarantee pay’ and, following four weeks of lay off,  can also apply for a statutory redundancy payment. The UK Government’s new initiative on furloughed workers should not be confused with lay off, as the rules relating to claiming such redundancy payment only come into play if an employee is not receiving pay during a period of lay off.  In situations where an employee is placed on a period of furlough leave, where their employer intends to make a claim from the Government for 80% of their wages, such employees would be receiving pay. This would mean they would not be entitled to make a claim for a statutory redundancy payment after four weeks furlough leave. 

The government guidance on placing employees on furlough leaves states ‘changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation’.  Employers should note that they will be unable to place any employee on furlough leave which involves an employee receiving less contractual pay than stated in their contract of employment, without the employee’s consent.  Employers may have provisions for garden leave, but this will typically entitle an employer to place an employee on a period of leave if they make payment of their full remuneration.  Such employers that have a contractual right to lay off employees typically will only have the right to lay such employees off without any pay whatsoever. Therefore, unilaterally placing an employee on any period of furlough leave where an employee is receiving less than their full salary could give rise to  claims for breach of contract and constructive unfair dismissal.

Employers reach agreement with employees that they be placed on a period of furlough leave.  In the present circumstances, it is highly likely that employees will agree to such a period of leave.  Typically, such agreed leave should be recorded in a letter or document signed by both parties. We appreciate this is an unprecedented time for many businesses and employees. If you have any questions at all, please do not hesitate to contact us

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