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A guide to termination of employment during furlough

Clare Thomas, Solicitor - Bowcock & Pursaill

Many employers are currently utilizing the Coronavirus Job Retention Scheme (CJRS) and this will remain available until the end of June 2020 (unless the Government confirms a further extension). Solicitor and Bowcock and Pursaill, Clare Thomas explains employers’ options regarding termination of employment during furlough.

Whilst the CJRS has provided businesses with some time before making more drastic changes to the workforce in response to the pandemic, most will already be trying to evaluate the short, medium and long-term impact of Covid-19 both on the economy in general and more specifically their business. Some businesses will close sadly. However, businesses that survive are going to need to be in the strongest position possible to thrive once the lockdown eases. They also need to be mindful of the risk of employment-related claims taken in response to the pandemic as these could add a significant complication to the management of their resources.

Employers should also be aware that whilst employees are on furlough their employment rights are otherwise continuing. For example, holiday continues to accrue during any furlough so accrued holiday will be an additional factor to consider either when employees return to work. In addition, employees who did not have two years’ service at the point when they were furloughed could achieve this whilst on furlough; at which point the steps required to make a redundancy become more onerous.

Larger employees who are looking to impact on 20 or more employees will also need to be mindful of obligations to collectively consult for a minimum period of 30 and potentially 45 days if 100 or more employees will be affected.

Finally, employees with longer standing service will potentially be entitled to long periods of notice which will also need to be factored into any calculations.

What steps might businesses be considering?
Once the CJRS scheme end, or even before that time, employers will be looking to cut costs through reducing hours and even salaries in order to preserve the workforce. This will not necessarily be straightforward as any such changes will usually require the consent of the employees. However, the alternative is likely to be redundancies.

Can an employer make employees on furlough redundant?
The HMRC Covid-19 Guidance for Employees (Employee’s CJRS guidance) confirms that an employee can be made redundant whilst on furlough or afterwards and that an employee’s redundancy rights will not be affected by being furloughed.

Employers cannot use the CRJS to claim reimbursement of redundancy payments.

How would an employer carry out redundancies whilst employees are furloughed?
We consider it likely that employee and trade union representatives, who may need to be consulted on redundancy during furlough, can perform their duties without breaking their furlough but this has not been expressly confirmed either way.

Employers will need to consider the practical difficulties arising in undertaking redundancy consultation whilst many affected employees are on furlough. Can the employer utilize virtual meetings? Does the employee have the facility to participate in a video call? Can consultation be undertaken by telephone or in writing? How will employees who are currently sick and unable to engage in consultation be managed?

Can you serve an employee on furlough with notice and what notice pay are they entitled to?
We are not aware of any reason that a furloughed employee could not be served with notice of termination of employment.

Notice pay for an employee during furlough depends firstly on the types of hours worked (i.e. if normal hours are worked or not) and secondly on the amount of notice the employer is required to give and, in particular, whether or not that is in excess of the statutory minimum entitlement and, if so, by how much. It is recommended that employers take specific legal advice on this point to ensure that they pay the correct amount whilst also continuing to benefit from the CJRS as much as possible (subject to eligibility otherwise, etc.).

A payment in lieu of notice may also not be appropriate if the employee is furloughed. There does not appear to be any mechanism for employers who dismiss and pay in lieu of notice to reclaim the PILON under the CJRS. It may therefore be advisable to keep employees on furlough employed during their notice period, but this may depend on the specific circumstances.

How should furlough impact on redundancy pooling (if at all)?
It is not advisable to use the fact that some employees are furloughed to identify selection pools. The choice of pool must be within the range of reasonable responses to defend an unfair dismissal or discrimination claim. Employers must usually consider the type of work which is ceasing or diminishing, and which employees perform this kind of work.

If an employer limits the selection pool to those already furloughed this may be regarded as unfair because the selection process for putting employees on furlough may not have been as vigorous as required when dismissals are considered.

Employers should not therefore be tempted to short-cut this process; particularly where for example child-care duties have impacted on a decision to furlough or not. Employers should also not lose sight of their obligations to employees who are currently on any other statutory leave, i.e. maternity leave, sick leave as this could also give rise to discrimination claims.

 

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