Four things to think about when considering furlough leave

Nick Denys
Nick DenysPolicy advisor, the Law Society

Nick Denys is the policy adviser who leads on employment and family law matters at the Law Society.

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This time one month ago in mid-March, I was drumming my fingers impatiently, waiting for the government to publish more information about the Employment Rights Bill, and thinking about the impact of Brexit on the Working Time Regulations 1998.

Then, the government announced strict coronavirus suppression measures alongside generous state-aid packages. Since then, my colleagues and I have been unpicking the consequences of the announcements.

One of the areas I have been concentrating on is the Coronavirus Job Retention Scheme (the scheme), alternatively known as furlough leave. As part of our Business Continuity Toolkit, we have produced guidance to help members better understand how the scheme applies to law firms. Here, I explain some of the more uncertain aspects of the scheme, that are useful to consider if you are putting workers on furlough leave.

The scheme does not change employment law, but it does challenge it

The scheme is an economic support package. Its rules determine the eligibility of certain employers to receive what amounts to a grant to cover the wages of workers who no longer have work to do.

HM Revenue & Customs (HMRC) says employment law should apply “as usual” to how organisations administer the scheme. A concept such as furlough leave has never existed before, so employment lawyers have spent the last few weeks thinking about how the “normal” applies to these extraordinary times.

It is best to get written agreement from furloughed employees

From an employment law perspective, it may not be necessary to gain the agreement of the employees furloughed. If an organisation tops up the grant so its employees continue to receive 100% of their salary, consent might not be necessary, as most workers have the right to be paid their salary, not the right to be at work.

Whether the explicit agreement of the employee is needed in order to qualify for the scheme is not clear. The government’s guidance on how to make a claim does not require such an agreement. The direction from HM Treasury states that a written agreement is necessary, though it is not clear what this means in practice, especially when read alongside the guidance.

The safest way to proceed is to get written consent from the employees who are furloughed. This can be done retrospectively.

Those on furlough leave can volunteer and take part in training, as long as they are not providing a service for their employer

The government is insistent that it does not want to subsidise work, but neither does it want to deny training or volunteering opportunities for those on furlough leave. Organisations are allowed to provide these as long as the activity “…does not provide services to or generate revenue for, or on behalf of your organisation or a linked or associated organisation”.

What we do not know is where HMRC will draw the line. This is one of those matters where the best indication of whether an activity complies with the scheme will probably come down to the feeling you have about the activity.

The safest approach is for there to be a clear separation between the volunteering and/or training carried out by the furloughed worker and the services provided by the organisation.

Those on furlough leave still accrue holiday, though it is less certain whether an employer can force them to take annual leave

Holiday entitlement will continue to accrue during furlough leave. Workers continue to maintain their rights under the Working Time Regulations 1998. This is certain.

Organisations may face a challenge when furlough leave ends, as those who are furloughed may want to use their accrued holiday just as workload is increasing. This will become more of an issue the longer the scheme runs for. To deal with this problem, some organisations may offer to buy back the annual leave that is in excess of statutory leave. Others might change their holiday policy to encourage the build-up of holiday to be taken evenly over the next two years.

What is not known is whether organisations can force workers to take annual leave while on furlough leave. In normal times, they would not be able to force those on maternity leave to do so. This is because the right to annual leave is connected to the health and safety of workers. The courts classify annual leave as a period of relaxation and leisure, so if you cannot get away from what you are contractually obliged to do, then you cannot take a holiday.

It is unsurprising that there are still some uncertainties with the scheme, as the government has had to create it at breakneck speed. Whitehall should be praised for what it has achieved in such a short space of time.

We have been helping by advising officials of the impacts of what is being proposed. If you have any thoughts about how the scheme is working, please email us at coronavirus@lawsociety.org.uk and we will pass the feedback on.