Over the Easter Bank Holiday weekend, there have been a number of developments on the Coronavirus Job Retention Scheme (CJRS). On Thursday, 9 April, the Government published a third version of its guidance on the Scheme. Also, the first Court judgment on the scheme was handed down from the High Court on Easter Monday, 13 April. We have set out our thoughts on the decision below.
In addition, just this afternoon, the fourth version of the Government guidance was published. The main update being the qualifying date when the employee has to have been on the employer’s payroll, has changed from 28 February 2020 to 19 March 2020.
Furthermore, this afternoon, the Treasury has issued a Direction to HMRC under powers conferred by the Coronavirus Act 2020, containing authority and instructions for making payments under the CJRS. It is likely to be the definitive guidance on how the scheme works and can be read here. We have summarised below the main changes and points of clarification that are set out in the Direction.
Updated Government Guidance on the CJRS
Firstly, the key points from the updated Guidance on the CJRS can be summarised as follows:-
- Clarification was given that employers can furlough ‘shielding’ employees or those on long-term sickness absence and they do not have to be placed on sick pay. It is up to employers to decide whether to furlough these employees. You can claim back from both the CJRS and the Statutory Sick Pay rebate scheme for the same employee but not for the same period of time. There is also no longer a need to show that shielding employees cannot work from home and would otherwise be made redundant.
- Employees on sick leave can therefore be furloughed and moved from sick pay onto furlough pay. Also, those who fall ill during furlough can be moved onto Statutory Sick Pay or remain on furlough pay.
- Employees who are transferred to a new employer under TUPE after 19 March 2020 will be eligible for furlough. The Guidance states that “A new employer is eligible to claim under the CJRS in respect of the employees of a previous business transferred after 19 March 2020 if either the TUPE or PAYE business succession rules apply to the change in ownership.”
- Those with certain work visas will not be regarded as breaching their visa conditions if they receive funds under the furlough scheme. The Guidance states “Grants under the scheme are not counted as ‘access to public funds’, and you can furlough employees on all categories of visa”.
- Clarification was given that the reclaimable National Insurance and pension elements are on the reduced furlough salary, not normal salary.
- Employees cannot work for organisations that are “linked” to their employer, as well as not working for their employer, when on furlough.
- The entire grant must be paid to the employee in the form of money (with no deductions for fees, administration charges etc.). No part of the reclaimed grant can be “netted off” to fund benefits.
- Claims for full or part time employees returning from statutory leave, including maternity, paternity, adoption, bereavement or shared parental leave, should be calculated against their salary, before tax, and not against the pay they received on statutory leave.
- The updated guidance of today gives a clear direction that employees are not to contact HMRC if they want information on what employers have claimed for. Furthermore, all employers must keep their employees well informed.
- Today’s guidance also says that if you have fewer than 100 employees you will need to enter the relevant details for each of them when the portal goes live. If you have more than 100 employees, you can upload a file with the relevant information.
A link to the updated Government guidance of 9 and 15 April can be found here.
We also now know that HMRC told a Parliamentary Select Committee that the online portal will open next Monday, 20 April, with the first reimbursements to be made on 30 April.
Unfortunately, no guidance was given about taking or being made to take annual leave during furlough. We would refer you to our previous briefing note of Friday, 3 April, for our thoughts on annual leave and furlough.
Treasury Direction – 15 April
The key changes / points of clarification under the Treasury Direction are as follows:-
- Employees who were employed on 19 March 2020 (not 28 February 2020) are eligible for furlough, provided the employer had submitted real time information payroll data by that date.
- The Scheme is not restricted to redundancy situations. It applies to any employees who are furloughed “by reason of circumstances as a result of coronavirus or coronavirus disease”.
- Another significant change, is that to claim furlough, the employer and the employee must have agreed in writing that the employee will cease all work. The previous guidance only required written notification to employees that they are to be furloughed.
- The amount of salary for the employee must disregard anything which is not “regular salary or wages”. That includes disregarding any performance related bonuses or discretionary payments such as tips, any conditional payments or any non-financial benefits.
Unfortunately the Treasury Direction is entirely silent on the subject of annual leave during furlough.
Carluccio’s High Court decision
The first CJRS case has been heard in the High Court. It is the first decision examining aspects of the new scheme. On Easter Monday, 13 April, the High Court handed down its judgment. The case relates to Carluccios, a restaurant chain that was recently placed in administration.
The company closed its branches on 16 March 2020 following the Prime Minister’s advice that all restaurants should close. The company entered administration on 30 March 2020. As part of a strategy to rescue the business, the administrators wanted to retain the company’s employees rather than make them redundant. However, due to the lack of funds available to the insolvent company, that could only be achieved if the administrators could access the CJRS and furlough the company’s employees.
The administrators wrote to all of the company’s employees offering to continue to employ them on varied terms as furloughed employees under the CJRS. The furlough/variation letter invited employees to respond by email by 3 April 2020 to confirm if they consented to being furloughed. The letter stated “Please note that if the Company does not receive an email from you by the above deadline, the Administrators will need to review your position within the Company and may be required to consider the possibility that your role is redundant.” The letter did not state that a failure to respond would be deemed to indicate the employee’s agreement to the proposal.
By 7 April, 1707 of the 1788 employees had accepted the terms, 4 had rejected the terms and said that they wanted to be made redundant and 77 had not responded. The Court considered whether there had been an effective variation of contract in relation to each group of employees.
The Court held that the company’s administrators are able to furlough the employees and claim for their wages under the CJRS. The furlough/variation letter issued to the employees was held to have validly amended the contracts of those employees who had expressly agreed to be furloughed. The Court rejected the argument that the contracts of those 77 employees who had not yet responded had also been amended. However, the Court went on to determine that the 77 employees that had not responded, can now do so and be placed in the same position as those who agreed to be furloughed straight away.
A couple of practical take away points from the judgment are:-
- You may consider making it clear in your furlough/variation letters or agreements that any failure to respond to give consent to being furloughed, will be taken as an indication that the employee agrees to being furloughed and that the employee will be furloughed in the absence of any affirmative response.
- You may also consider putting a read receipt on any email communications requesting consent to be furloughed. At least that way you know the employee has received the furlough proposal.
This article does not constitute legal advice and specific advice should be sought in respect of particular cases.