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Boddy Matthews Solicitors successfully defend a Furlough notice pay claim for Construction contractor client

 

As the Furlough scheme reaches its first anniversary, Michal Stein of Boddy Matthews has successfully defended a claim brought by an ex-employee against one of its construction contractor clients. While the facts of the claim are straightforward and, likely, not unusual, the legal points at issue are of utmost importance and likely to affect many employers, facing redundancy situations despite the Coronavirus Job Retention Scheme.

 

As a result of the Covid-19 pandemic and lockdown, the employer client placed some of its workforce on Furlough, paying employees 80% of their contractual pay subject to the Scheme’s £2,500 monthly salary cap. When redundancies had to be made, the employer paid employees’ notice pay at the furlough rate. The contractual rate of pay was paid only for the part of the notice period which fell on or after 31 July 2020, when the Employment Rights Act 1996 (Coronavirus, Calculation of a Week’s Pay) Regulations 2020 (“the 2020 Regulations”) came into force. The 2020 Regulations required furlough notice pay to be at the pre-furlough rate.

Based on Boddy Matthews’ legal advice, our Construction contractor client took the view that:

  • up until the introduction of the 2020 Regulations, the statutory provisions on notice pay (under the Employment Rights Act 1996) entitled it to pay statutory notice pay at the furlough rate;
  • the contractual principles governing the furlough agreement allowed it to pay employees the furlough rate of pay for the duration of their notice period; and
  • the 2020 Regulations changed the legal position as it understood it to be, were not retrospective, and only apply to notice periods from 31 July 2020.

The client sought to reassure its workforce of the legality of its actions, setting out the legal position in clear communication.

Nonetheless, possibly due to the complexity of the law at play, and the considerable media discussion (and misinformation) on this issue, the client faced an employment tribunal claim from one of its ex-employees. That individual believed he was entitled to his pre-furlough rate of pay for the duration of his notice period and the matter came before the Employment Tribunal in a virtual hearing.

Michal Stein represented our client before the Tribunal, which accepted our client’s position in full, dismissing all elements of the claim.

As far as we know, this is the first time the Employment Tribunal has dealt with the question of the rate of furlough notice pay. And, while employment tribunals are not bound by this decision, it is likely to be of considerable value to other employers faced with similar complaints.

For more information, please speak to Michal Stein or Helen Boddy.

 



Equality and Diversity - Training and policies must be of high quality and up to date to protect employers against complaints for harassment and discrimination

Workplace discrimination and harassment instances are distressing to all concerned. They can have serious implications on employment relations and employees’ wellbeing and can result in Employment Tribunal claims. More often than not, while a claim is brought against an employer (e.g. the employing company), the employer is not the perpetrator of the conduct in question. Rather, the act complained of is likely to have been committed by a colleague or a manager of the complainant. The employer is treated as vicariously responsible for the wrongdoing because it employs the perpetrator and (broadly speaking) the act took place at work. In recognition of the potential unfairness to employers, the legislation provides for a “reasonable steps” defence which enables employers to avoid liability if they can show that they have taken all reasonable steps to prevent the perpetrator from doing the objectionable act or acts of that kind.

 

But what must employers do to benefit from the defence? As a first step, employers ought to have equality policies and procedures in place, supported by suitable training for all staff.

 

However, this is only the start and a recent Employment Appeals Tribunal decision confirms that, when assessing whether an employer has done enough to escape liability, focus will be firmly placed not on what the employer has done but, crucially, what more it could have doneWhere more could be done, the defence will not be made out, even if the additional steps would not have prevented the harassment or discrimination from occurring.

 

In assessing the additional steps employers may have to take, a tribunal will take into account the size and resources of the employer, the cost of the additional steps, their potential effectiveness and the practicability of providing them. If, having looked at these issues, the tribunal concludes that there were further steps that the employer should have reasonably taken, the defence will fail.

 

The case sends an important message to employers about the nature and extent of the commitment they must have (and display) to preventing workplace discrimination and harassment. Employers are advised to adopt and regularly review high quality policies and training. In addition to regular and periodic assessment of the steps taken to prevent discrimination, where discrimination or harassment is observed or becomes known, the policies and training must be reviewed, adapted and refreshed.

 


 

Employers may owe collective redundancy consultation duties to previously dismissed employees

 

Large scale redundancies, by no means unknown pre Covid19, have featured heavily in recent months. Employers who propose to make collective redundancies are subject to stringent legal requirements which originate from EU legislation and which, at least for the time being, continue to apply unchanged despite the UK’s departure from the EU.

 

Briefly, an employer who proposes to make 20 or more redundancies within a period of 90 days must collectively inform and consult with its workforce, as well as inform the Insolvency Service in advance of carrying out its plans (using from HR1). Failure to meet the former duty can result in an award of 90 days’ gross pay per affected employee. Failure to meet the latter duty without justification is a criminal offence which may result in prosecution and/or fine for the employer and, potentially, any of its officers.

 

Despite some mismatch between the UK’s and EU’s legislation, these duties have been understood and interpreted by the UK courts to be forward-looking. This meant that if an employer made 10 employees redundant one month and then proposed to make 10 more employees redundant the following month, it only had to consult with the second batch of employees and only had to inform the Insolvency Service once it had made the second proposal.

 

A recent judgment of the European Court puts an end to this.

 

At the end of last year, the European Court held that, to properly protect employees, the law must be understood as requiring employers to look both backward and forward and take into account redundancies within any period of 90 consecutive days, whether backward or forward looking.

 

The practical effect of this decision is yet to be fully understood. Strictly speaking, however, an employer is now expected to collectively consult about redundancies which have already occurred if, within the 90-day period surrounding of these dismissals, additional redundancies are made with the total exceeding 20. In addition, form HR1 will have to be submitted to the Insolvency Service referring back in time to the earlier redundancies.

 

It remains to be seen how employers are to comply with these duties in relation to employees who already departed the business and to what extent they may rely on the statutory defence of special circumstances. The factual circumstances of each case will need to be closely examined and assessed. At this point, it is more important than ever to implement timely consideration of all relevant plans, present and future, as well as possible risks, before taking any action to implement such plans.

 

For specific advice, please contact Helen Boddy or Michal Stein.

 


 

 

Furlough scheme extended to March 2021 – but is all as it seems?

 

As England entered into a second lockdown, the government abolished the (newly-created) Job Support Scheme and extended the Furlough scheme, until March 2021.

 

The extended scheme has many similarities with the scheme first brought into place in March 2020, but a number of features, and possible developments, need to be born in mind.

 

Key Information on Extended Furlough

  • Under the Extended Furlough scheme the government will pay 80% of a Furloughed employee’s wages (capped at £2,500) for hours not worked. Employers can require employees to do some work, if they Furlough them on a flexible basis and pay their contractual wage for worked hours.  
  • At least until 31 January 2021, employer must pay the national insurance and employer pension contributions per Furloughed employee. From that date, the government may require employers to increase their contributions / payments under the scheme.
  • From 1 December 2020, employers may not bae able to use the Furlough grant to pay part of an employee’s notice pay (statutory or contractual). We await government decision on this point (which we hope will also clarify whether the prohibition is limited to notice pay where notice is given on or after 1 December 2020 only).
  • As the scheme was extended in a rush, employers were given the option of making claims going back to 1 November 2020, provided they reached an agreement with employees by 13 November 2020. Agreement reached after that date will not entitle employers to make backdated claims.
  • Also from December 2020, HMRC will publish the names and details of employers (companies and Limited Liability Partnerships) who have made claims under the scheme for the month of December onwards. This may be designed to deter certain employers from using the Furlough grant.

Steps for employers to consider

  • Due to the changes introduced in the extended scheme, it is advisable to review your Furlough agreement to ensure it provides you with the flexibility you may need as the scheme develops.
  • In some instances, the risk of not having to use the Furlough grant to cover part of an employee’s notice pay, may lead employers to bring forward potential redundancies.
  • Many businesses have learned important lessons from the first lockdown and aim to continue working and trading as much as possible. The option of flexible Furlough should therefore be taken on board, with appropriate and lawful selection and decision-making processes applied to minimise the risk of any claim by affected employees.


 

Senior Manager Dismissed Fairly Despite the Absence of Any Procedure

 

A recent Employment Appeals Tribunal decision has confirmed an important principle of employment law: that in certain cases the dismissal of an employee without any procedure can be fair.

 

Generally speaking, unfair dismissal law requires employers to have both a “fair” reason for dismissal and to follow a “fair” dismissal procedure. There is an exception, however, where the employer contends - and can prove - that following a procedure would have been futile. This exception was successful in the recent case of Gallacher v Abellio Scotrail Limited.

 

The working relationship between Mrs Gallacher (a senior manager) and her own line manager broke down. Although the parties previously held two meetings to seek to resolve the disagreements, these were unsuccessful. Subsequently, during her annual appraisal, Mrs Gallacher was dismissed for lack of trust. Her claim for unfair dismissal failed as her employer was able to prove not only that a procedure would not have served any useful purpose, but also that it would have worsened the situation. This was a case where a continued good working relationship between Mrs Gallacher and her line manager was critical as the employer was going through a very difficult period. In addition, the evidence showed that Mrs Gallacher recognised the breakdown in relations herself and was not inclined to retrieve the situation.

 

The employment tribunal found the dismissal to be fair despite the absence of any procedure, and this was upheld by the Employment Appeals Tribunal. Although this case represents the exception from a well-established general rule, it serves as a helpful authority for cases where an employer has good grounds to believe that immediate termination of the employment, without adopting due process, is justified.

 

We would nevertheless recommend that you take specific legal advice on a case by case basis as each case will turn on its own particular facts and circumstances.

 


 

Covid-19 – return to work trends and measures

 

As Covid-19 lockdown measures continue to ease (at least for the time-being), employers need to manage a proper and lawful return to work, alongside a raft of new legal and economic measures (e.g. flexible furlough, possible redundancies and the Job Retention Bonus).

 

Despite government encouragement (and likely new guidance), employers and employee appear in no rush to bring employees back to “base”. Many are still conducting risk assessments and employee consultation. Others are keen to implement longer-term flexible and home working arrangements.

 

A note of caution, however. While during the early stages of the Covid-19 lockdown the Information Commissioner and Health and Safety Executive were willing to turn a blind-eye to elements of non-compliance, future non-compliance with data protection and health and safety requirements is unlikely to be excused as easily. Part of current return to work assessments must include compliance with data protection and health and safety requirements.

 

It is also important to bear in mind that the longer remote working continues the less “control” the employer has over work equipment (and passwords to such equipment); confidential information and contact with employees. Measures which may have been put in haste in March / April 2020 may no longer be suitable, and should be revised, going forward.

 

Bear in mind also that you may need to implement different arrangements to previously shielding employees who (in England) will be permitted outside their home from 1 August 2020. However, previously shielding employees will need to continue to maintain two metres distance (unlike others who may maintain a 1-metre distance from others provided suitable protective measures are in place). As a result, employers may need to make different arrangements for employees who previously shielded and are returning to work on or after 1 August 2020, than for non-shielding staff.

 


 

Flexible Furlough Scheme – a quick reminder on how it works

 

From 1 July 2020, employers have been able to implement ‘flexible furlough’ under which employees can do some work for their employer, without employers losing the right to claim furlough pay in respect of the hours not worked by the employees.

 

Thee new regime is complex and below is a summary of the key points. Employers who seek to implement flexible furlough should familiarise themselves with all guidance and information on the new regime.

 

  • Flexible furlough is only available in respect of employees who have been furloughed previously for at least three consecutive weeks in the period between 1 March and 30 June 2020.

  • There is no minimum or fixed requirements of pattern or working hours in relation to flexible furlough. And, unlike in relation to “normal” furlough which required employees to be furloughed for at least 3 weeks at a time, there is no minimum period for flexible furlough. However, claims can only be made in weekly increments.

  • Employers can claim a pro-rated amount of an employee’s 80% of salary, based on the proportion of hours not worked out of normal working hours. Calculation of “normal working hours” will vary depending on whether the employee is (normally) on fixed hours/pay or variable hours/pay. For employees with fixed hours/pay, the calculation is based on the number of hours worked in the pay period before 19 March 2020 (e.g. during the month of February if the pay period is monthly). For employees with variable hours/pay, the calculation is based on the higher of (i) the average number of hours worked in the tax year 2019-2020; or (ii) the average hours worked in the corresponding calendar period in the tax year 2019-2020 (e.g. for flexible furlough work in July 2020, look at the hours worked in July 2019).

  • For any hours which an employee works during flexible furlough, employers will need to pay wages, tax and NICs in the usual way.

  • Employers should submit data on the usual hours the employee would be expected to work in the relevant period, the actual hours for which the employee worked and the number of furloughed hours in the relevant claim period.

  • Employers should have a written agreement on flexible furlough arrangements with their employees. It is unlikely that a written record of a verbal agreement will be sufficient. The guidance also states that any flexible furlough agreement must be “consistent with employment, equality and discrimination laws.”

  • It is likely that holiday entitlement of employees working under a flexible furlough scheme will continue to accrue in the usual way.


 

Furlough-specific directors’ liabilities – first arrest reported

 

With the Furlough scheme winding down and lockdown measures being eased, HMRC has announced plans to penalise company directors who intentionally breach the furlough scheme rules. 13 July 2020 saw the first reported arrest for Furlough fraud – Contractor UK reported the arrest of a business owner for a £495,000 Furlough fraud. The business’ bank account was frozen and computers and digital equipment seized.

 

It is predicted that HMRC will focus on the following three potential offences when carrying out checks:

  • Furlough wages obtained and not paid to employees (in full or in part);
  • Furloughed employees and directors worked during furlough; and
  • Employers coerced employees to work while on furlough.

Provisions on Furlough-related offences and HMRC powers will be made under the Finance Act 2020 (which is expected to come into force later this summer) and, as things stand, are expected to include:

  • Power to make company directors jointly and severally liable for penalties under the furlough scheme (even where a co-director was unaware of the fraudulent conduct in question);
  • HMRC powers to impose a 100% tax charge on anyone who misapplied furlough funds, e.g. used furlough funds not to pay employees, but to cover other business costs);
  • HMRC powers to impose a 100% tax charge on anyone who has received a payment under the scheme to which they were not entitled.

It is also anticipated (but yet to be confirmed) that, once the Act comes into force, employers will have a 30-day grace period in which to report maladministration or misuse of the Furlough scheme without being penalised.

 

The Finance Bill had its first reading on 2 July and its second reading – when a general debate on all aspects of the Bill take place and the remaining stages - is scheduled for 17 July 2020.

 

For advice on the Furlough scheme, please speak to Helen Boddy or Michal Stein at Boddy Matthews Solicitors.



 

Furlough scheme changes – key dates for your diary

 

Late last month, the government announced changes to the Furlough Scheme. Having seen more than 8 million employee benefiting from the scheme, at an approximate cost of £15bn, a gradual scale down has been introduced.

 

Key dates of the revised scheme are as follows:

 

1 July 2020: The Flexible furlough scheme comes into effect. Under this scheme, employers can agree with employees any level of part-time working without the employee coming off the furlough scheme completely. Employers will have to pay (the contractual pay) to the employee for the hours actually worked. Pro-rata furlough pay will be payable by the government for hours on which the employee is not working (subject to existing and changing limits, see below). Flexible working can be done on a week by week basis for the purposes of the furlough claim. We will review the flexible furlough scheme in more detail in a forthcoming blog.

 

1 August 2020: from this date employers will need to pay employer NIC's and pension contributions on Furlough pay.

 

1 September 2020:  from this date, government contributions will reduce by 10%. This means that the government will pay 70% of furloughed employee's wages up to a maximum of £2,187.50 per month. Employers will have to make up the “lost” 10% of employee's salary (up to £312.50) in addition to paying employer NIC’s and pension contributions. Failure to make the necessary top up could mean that employees are not validly furloughed (with potential claims from the employees and, possibly, HMRC).

 

1 October 2020: from this date, the employer must contribute 20% of the employee's salary, i.e. up to £625.

 

31 October 2020: the furlough scheme ends.

 


 

Covid 19 – conducting disciplinary and grievance procedures and hearings

 

One of the many difficulties that employers have been experiencing during the Covid-19 pandemic and lockdown has been the day-to-day management of employees working from home in circumstances where the norm is no longer normal. However, businesses must survive and employees’ conduct and performance remains a critical issue.

 

With this in mind, ACAS has published guidance on conducting disciplinary and grievance procedures during the coronavirus pandemic. While the guidance has no legal force, in the event of a dispute, tribunals may take its content into account. This is a matter of some concern regarding employers with Furloughed employees as helpfully, ACAS takes the view that a Furloughed employee can still participate in a disciplinary or grievance investigation or hearing including if they are the person under investigation, chairing a hearing, acting as a companion or witness or taking a note, but somewhat unhelpfully, that participation must be voluntary.

 

In our opinion, matters are not as straightforward. For example, employers should not need an employee’s voluntary agreement to begin disciplinary proceedings, pandemic or not. We are also concerned that employees who act as companions, note takers or Chair during a hearing may be regarded as working by HMRC, which would be inconsistent with their Furlough status. The Employment and Tax regimes are separate and distinct and are not always aligned in their approach. We would, therefore advise caution, case by case assessment, reliance on established legal principles and the existing ACAS Code of Practice on Disciplinary and Grievance Procedures as well as bespoke legal advice.

 

From our experience, it is possible to conduct disciplinary and grievance hearings during the Covid-19 lockdown, provided certain adjustments are made. We have advised on remote grievance hearings, online mediation and conducting virtual workplace investigations. Creative solutions are possible and can be tailored to the specific needs and circumstances of employers and their workforce.

 


 

Homeworking – Lockdown’s unintended evolution

 

Alongside supermarket queues, handwashing, deep cleaning and Furlough, homeworking has been one of the defining features of the Covid-19 lockdown. The most recent ONS statistics on homeworking (2019 - published at the very start of lockdown) showed that of the UK’s 32.6 million in employment, only 1.7 million people reported working mainly from home. And, while there are no up to date statistics on the rate and number of homeworkers during Covid-19, there is little doubt that they are far higher than before. Many employers and employees expect home working to become more established, if not the norm.

So, what should you be thinking about if you want your workforce to work from home more regularly? The starting point must be an agreement in principle for homeworking to take place. This may have already been set out in your employment contracts, handbook or policies. But, if not, you will need to amend your documentation with the agreement of (and following consultation with) the workforce.

Issues to consider when establishing homeworking include:

  • The employer’s health and safety obligations (these apply to remote workers in much the same as to those at the workplace);
  • The government’s temporary relaxation on working at home assessments was based on the need for businesses to make emergency arrangements to meet the guidance. It is now clear that the period of working at home will be longer than anticipated and, in some cases, the ‘new normal’.
  • Employers should review whether the initial measures that they took to support staff working from home are still sufficient. If an employee raises a concern about their home working arrangement, the employer should take action.
  • In order to comply with health and safety obligations, the employer should carry out a risk assessment to identify and mitigate potential risks to their employees whilst working from home and to establish safe working practices in agreement with their employees.
  • Check the employer’s liability insurance to ensure cover extends to employees working from home and any special conditions that the insurer may require.
  • Provision, ownership and access to equipment. For example, will you supply a work laptop or other office equipment and, if so, how will you ensure its retrieval on termination of employment;
  • Confidentiality and data protection issues;
  • Expenses, tax and insurance. Employees will need to have and maintain adequate home and contents insurance policies. They may seek to recoup some expenses related to homeworking and some may be entitled to limited tax breaks. These issues ought to be determined in advance; and
  • Communication, supervision and support of employees. Not everyone will find homeworking easy and some employees will miss the social element of work and/or the discipline intrinsic to the workplace. To ensure productivity remains high and employees’ well-being is unaffected, various safeguards will need to be introduced.

The Government may introduce a new legal right for employees to work from home, which would mean that employers would only be able to reject a working from home request if a staff member’s job could only be done in the workplace. Watch this space for more information once we know more.

 



Covid-19 Return to Work – More Questions than Answers for Employers

 

The Government’s recent announcement that employees who cannot work from home should return to work has given rise to more questions than answers. Without doubt, the current situation is unprecedented. Many employees who cannot work from home may not, in reality, be able to return to work for a number of reasons. These may include childcare difficulties, transport concerns, medical limitations (e.g. a need to shield if vulnerable) as well as substantiated or unsubstantiated fears that the workplace will be unsafe.

 

Without specific legislation in place, employers, HR professionals and their advisers need to turn to existing legislative and contractual principles for answers.

 

In brief, where an employer is keen and able to reopen its business, it should, as first steps:

  • Identify and implement the necessary health and safety measures that will enable it to be “Covid-compliant”. Without these measures in place, the employer is likely to breach Health and Safety legislation and will not be able to insist on the return of the workforce. It will not be reasonable for an employer to expect its staff to provide health and safety equipment to facilitate Covid-compliant work – the onus is on the employer.
  • Identify the number and identity of employees which need to return. Now is also a good time to consider which employees have interchangeable skills which the business may need to utilise.
  • Identify and, if necessary, revise working patterns. For example, where an employer operates a shift pattern, it has been suggested that it should “bubble” together the same employees into a shift unit, to minimise the risk of exposure to a limited number of individuals. Staggered start and end times, alternate working days and location may also be needed (and may require employees’ agreement).
  • Speak to the workforce early to identify those employees who may have difficulty returning to work. Whereas under normal conditions an employer can insist on an employee being at work despite, say, childcare difficulties, this is unlikely to be the case for the foreseeable future. Disciplining or dismissing an employee who cannot be at work due to the need to look after young children who cannot attend school is likely to be regarded as unfair and, potentially, discriminatory.
  • If only part of the workforce is needed, tread carefully as to who is asked to return, to avoid the risk of discrimination (e.g. compelling young people to return before older employees may be discriminatory on grounds of age, albeit potentially justified in the current climate).
  • Finally, consider the need to update absence management procedures, e.g. for employees to get in touch regularly to update their availability for work and/or confirm why they may still not be able to attend.

In these uncertain times, going back to basic principles of employment law and good HR practice is essential. Both employers and employees are experiencing uncertain and unsettling times and getting things right at the onset will be beneficial in the long-term, and reduce the risk of future disputes.


 

Coronavirus Job Retention Scheme – HMRC Portal Still Open for Business

 

Employers have been able to make claims on HMRC’s Coronavirus Job Retention Scheme’s Portal since 20 April 2020. It is reportedly fairly easy to use the portal, although heavy traffic and an the odd site crush should be expected.

 

Shortly before the Portal went live, the Government issued important updates and clarifications as to how the Scheme operates. In particular:

  • The Scheme was extended to cover employees and workers who were on the payroll by 19 March 2020. Previously, the cut-off had been 28 February 2020.

  • There had been conflicting information as to whether employers had to obtain employees’ and workers’ written agreement to be Furloughed, or whether a written notification from the employer to the employee would be sufficient. To be on the safe side, it is advisable for the employer to obtain written consent (which can be made electronically via email), even in retrospect.

  • HMRC guidance to employees (but strangely not to employers) states that workers continue to accrue annual leave while on Furlough, and that they are entitled to take leave during this time. It goes on to state that holiday pay should be at the worker’s “usual holiday pay in accordance with the Working Time Regulations 1998”. This indicates that Furloughed employees who take holiday while Furloughed are entitled to be paid 100% of their normal wages for the period of annual leave. Employers may want to exercise their powers to restrict annual leave uptake during Furlough, in accordance with their statutory and contractual powers.

  • Conversely, whilst there is no formal clarification as to whether employers can require employees to take holiday during Furlough, we believe that this is permissible and eminently sensible.

HMRC has updated its Statutory Payment Manual to provide that Furloughed employees do not qualify for SSP. In addition, new Regulations confirm that employees will be deemed to be incapable of work if they are unable to work because they fall within the extremely vulnerable category and have been advised to shield. These Regulations came into force on 16 April 2020.

 


 
     
 

Office Address

 

Boddy Matthews Limited
7-11 High Street
Reigate, Surrey
RH2 9AA

 

Contact

 

+44 (0) 1737 339838
info@boddymatthews.com


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