Employment Rights and Coronavirus:

How do employers adapt to avoid claims?
By Alex Jones, Managing Director, 365 Employment Law

I have specialised in advising employers on employment law for nearly 20 years, and all businesses face periods where they need to make tough decisions. There is a general misperception among a lot of small businesses that it is difficult to dismiss staff in tough economic times. That is not the case. As a simple starting position, provided an employee is not being dismissed for a protected reason (eg a discriminatory one or whistleblowing), an employee must have at least 2 years continuous service in order to be able to raise most claims, including unfair dismissal. Even then, if the business has a genuine structural or economic reason to reduce their headcount, redundancy is a process that is, in most circumstances, relatively uncomplicated. If however, the employer gets the process wrong, either procedurally or on any justification, it can lead to claims.

In times of recession, the ability to make staff redundant (provided there is justification and a fair process), can allow an employer to reduce their headcount quickly and effectively, but also provide employees with a payment based on their length of service. Alternative methods on reducing costs, such as changes to working hours, changes to working days, or reduced pay, are fraught with difficulty, risk claims, and almost always require consent.

The period from mid-October to late November 2008, when the global financial crisis impacted suddenly on everyday business was the most intense period in recent years for many businesses, in terms of having to make staff redundant quickly, and consider other options. A number of employers faced claims for a failure to understand employment rights and how they interact with economic hardship for the business. At the time, many employers took the economic distress (both direct and the wider economic impact), as a reason to ignore employment rights, and create new justifications for dealing with staff, including the unilateral varying of terms, reductions in pay, and immediate dismissals. The mistakes made, without advice, led to a large increase in successful claims by employees as a result. In many situations, business that was precarious, was made worse as a result of bad decisions.

The period from mid-March this year saw similar considerations, but in a much shorter period. Business that was viable only one month previously, saw large amounts of turnover disappear overnight. Many employers had to consider immediate redundancies, and entered into discussions with staff about pay and hours reductions by consent. Similar mistakes were made as in 2008, with those employers not taking advice, and opening themselves up to future claims by imposing changes on staff without agreement in the name of economic justification.

On 21st March 2020, the Chancellor, Rishi Sunak, announced the Coronavirus Job Retention Scheme. This provided an ability for employees to “furlough” staff (a concept that did not exist in UK Employment Law at the time), by requiring them not to attend work for a set period. In return, the business would claim back up to 80% of any affected employees wages, capped at £2,500 per month. The scheme provided a back stop date, initially 28th February 2020, then changed to 19th March 2020, meaning in order to qualify, any employees must have been registered through HMRC under the real time reporting system for PAYE.

The scheme itself was relatively straightforward, allowing employers to reclaim the wages through an HMRC portal, a tax rebate or grant of sorts.

Unfortunately for many employers, they viewed the schemes interaction with their staff’s employment rights as also straightforward, assuming they could change terms unilaterally to fit in with the scheme at the 80% cap. Employees could of course always consent, and good employers sought out that consent to the 80% pay and furloughing. Many employers also chose to top up employees to 100% of pay whilst on the scheme.

Those that did however unilaterally impose the furlough on staff, faced and could still face a number of problems:

1) Employees could resign in breach of contract and claim Constructive Unfair Dismissal;

2) Those not wishing to go for the nuclear option of number 1, could object to the wage reduction, and provided they continued to object, bring a claim for unpaid wages at a later date for the difference;

3) If redundancy was threatened as an alternative, should staff not agree, and at least 20 staff where affected, then any affected employees could make an application to the Employment Tribunal for Protected Pay, which can be up to 90 days pay.

The Scheme, originally due to run until 30th June 2020, was recently extended until 30th September 2020. In considering the extension, it was reported that the original plan was to reduce the percentage recoverable down as the scheme ended. This did not materialise, largely as a result of pressure from both business groups and trade unions. It seems unlikely that a further extension will happen after 30th September, as the subsidy has effectively put large swathes of the workforce into an economic hibernation, and business function as a result. The nature of the scheme also means that staff in furlough, are not allowed to work for the employer in question, or the claim back will not be allowed, but strangely can work in paid employment for other employers.

In any event, employers would be wise to plan for the return of staff, both in terms of integration, but more importantly, to consider whether the events that were put on hold by the scheme, such as redundancies or changes to terms, will merely re-ignite when the scheme ends.

Whereas in mid-March, employers had little or no notice as to the affect of Coronavirus on the economy and more specifically their business, the medium term exit from the scheme, allows them to plan for their staff structures, and they should be open and transparent with staff. An employer that merely waits until the end of the scheme, then runs the same futile arguments about the need for wage or hours reductions, or unpaid part working, will face exactly the same claims they faced in March, but with little room for justification.

Please always take advice.

Alex Jones
365 Employment Law Solicitors
Tel: 01903 863284
ajones@365employmentlaw.co.uk
www.365employmentlaw.co.uk