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11/05/2020

COVID -19 The Case Study

Based on a true story…

1. Fit for Business Ltd, employs 175 people. It operates in the retail sector in 2 locations and have a warehouse facility. Due to the pandemic, it had to furlough 50 staff – 25 from one location and 25 from the other. The warehouse facility has expanded it’s production through on-line trading.

2. Fit for Business Ltd chose to furlough the most vulnerable employees in accordance with the government’s guidance who have happened to be between 50-70 years old. 2 of them have complained of age discrimination by raising grievances.

3. Some of the furloughed staff wish to cancel booked holidays but some wish for some of the accrued but un-taken holiday to be taken during furlough.

4. Some of the furloughed staff have asked whether the furlough payment is gross or net, and others have presumed that their benefits in kind (car and pension) will continue unaffected.

5. Jeff, the company’s CEO, has run out of money and does not intend to pay any staff until funding has been received from HMRC.

6. 50 key staff continued working remotely. 5 of the staff have asked to be furloughed but have been refused and made redundant instead. One of them is Lucy who is 25 years old and one of the “cheapest” employees.

7. 1 staff has refused to be furloughed because they do not wish to accept a 20% cut of their wages.

8. 2 staff have been on long-term sickness absence for a year before furlough was introduced.

9. Fit for Business Ltd has signed a furlough agreement with some of the employees but not with others.

10. Prior to the end of the furlough scheme Fit for Business Ltd Jeff wants to embark on a redundancy exercise and make all furloughed staff redundant.

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Potential claims

1. Direct age discrimination

  • There is a potential claim of direct age discrimination available to the furloughed employees. However, Fit for Business Ltd is likely to be able to objectively justify its decision as a proportionate means of achieving a legitimate aim in line with the government’s guidance of protecting the health and safety of vulnerable employees.
  • A grievance raised by two employees alleging age discrimination does not have to be paused while they are on furlough, although it is only likely to be possible where those involved in the investigation are not furloughed. Fit for Business Ltd needs to consider whether the employees who raised grievances have access to the technology to attend grievance meetings remotely.

2. Annual leave

  • If a worker has pre-arranged annual leave which falls during furlough and they want to cancel that leave, Fit for Business Ltd may compel them to take annual leave. However, Fit for Business Ltd must not act arbitrary, so that it does not breach the implied term of trust and confidence in refusing to accept a worker’s withdrawal of notice to take annual leave, or by issuing notice that the worker must still take annual leave on the days in question.
  • Furloughed employees will continue to accrue annual leave during furlough and can take annual leave during their furlough leave if they give the required notice. Employees are entitled to receive 100% of salary for annual leave during furlough.

3. Which payments are covered?

  • Only regular salary or wages are taken into account. This includes wages, past overtime, fees and compulsory commission payments. However, discretionary bonus (including tips) and commission payments and non-cash payments should be excluded.
  • The employer is obliged to pay a statutory minimum pension contribution of 3% to furloughed employees.

4. Employer’s failure to pay wages to furloughed employees

  • Where the employer does not pass the reimbursement on to the furloughed employee, the employee can make a claim for unlawful deduction of wages or breach of contract against the employer and report the employer through HMRC’s Report fraud to HMRC service. If the employer is insolvent, the employee needs to submit RP1 and RP2 forms to claim money from the National Insurance Fund.

5. Can an employee ask the employer to furlough them?

  • An employee can request this, but the employer does not have to agree. It is the employer’s decision which employees to place on furlough and which to make redundant. If the business is continuing there is an argument of unfair dismissal because although furlough is not alternative employment, it’s an alternative to being dismissed.
  • It would depend on each individual’s circumstances and the employer’s reasoning as to why an employee was not furloughed but made redundant instead. Lucy might also have a potential claim for age discrimination but this would depend on whether Fit for Business Ltd had applied objective criteria in a similar way to the redundancy scoring.

6. Refusal to accept a 20% cut

  • If there is no other alternative to keep an employees’ job, then Fit for Business Ltd would be entitled to make the employee redundant. It cannot deem the employee to have resigned if they refuse to accept a pay cut.

7. Long-term sickness absence

  • Furlough cannot start until the SSP entitlement period has ended.
  • Where an employer is selecting which employees to designate as furloughed, they must be mindful of the risk of discrimination if selection is linked to a protected characteristic such as disability.

8. Furlough Agreement

  • Fit for Business Ltd must agree all changes with the furloughed employees by signing a furlough agreement. Employees’ new status must be confirmed in writing and their consent must be obtained in writing. This is an eligibility requirement for accessing the subsidy, and a record must be kept for 5 years.

9. Redundancy on furlough

  • Fit for Business Ltd can serve notices of redundancy to furloughed employees.
  • Where there is a proposal to dismiss as redundant 20 or more employees at one establishment within a 90-day period, the employer will have to engage in collective consultation with a trade union or (if no union is recognised) elected employee representatives.
  • Fit for Business Ltd has to give consideration to whether suitable alternative employment exists within its organisation, potentially in the warehouse.
  • If Fit for Business Ltd makes no attempt to look for alternative employment, this might render the dismissals unfair.

If you have any questions please contact Irina Polyakova at irinapolyakova@eatonsmith.co.uk or on 01484 821 300.