Following hot on the heels of the last set of Coronavirus Guidance updates, we now have two further updates. Both the Employee Guidance Note “Check if your Employer can use the Coronavirus Job Retention Scheme”, and the Employer Guidance Note, “Check if you can claim for your Employees' wages through the Coronavirus Job Retention Scheme”, were updated on 23 April. As you would expect, the pace of change has slowed significantly, and there are only a limited number of changes of importance.
However, in relation to the two most vexed questions: (1) employee consent to furlough; and (2) furloughing of sick employees, there are some further points to make. We will look solely at the Employer Guidance Note as the changes made to the Employee Guidance Note make no additional changes.
First, the Guidance Notes are both very clear about when employees need to have started with the employer in order to be eligible to be covered by the Furlough Scheme. On the positive side the Government has produced a table, in the Employer Guidance Note, which sets out very clearly the dates for determining whether an Employee is eligible to be furloughed. If the Employee was both employed before 19 March 2020 and was on an RTI submission notifying payment prior to 19 March then the Employee is eligible to be furloughed. If the Employee joined after 19 March then they are not eligible to be furloughed but crucially if they had joined at any point before 19 March but had not yet been on an RTI submission before 19 March then they are ineligible to be furloughed. This is particularly tough on employees who had joined prior to 28 February 2020 but whose employer has a payroll run on or after 19 March (which surely will be the majority of employers?). Naturally you can see the point in having a fixed cut-off date, to avoid what might otherwise be fraudulent attempts to benefit from the Scheme. However, it is particularly tough on employees who had joined after the employer’s February payroll run and who have written documentation to prove this, but who had not yet been on payroll (a matter entirely outside of their control) by 19 March 2020. Indeed given that the original cut-off date was simply commencing employment by 28 February 2020, one wonders whether the Government will be able to hold the line for this approach. After all, given that a lot of the process of applying for public monies depends on documentation generated by the employer, rather than documentation submitted to HMRC (such as the furlough instruction letter) then there seems little reason to distinguish between a written offer of employment signed and dated to start before 19 March, and whether or not an individual was on payroll as at 19 March. However, for now the Government has been very clear that this is how the Furlough Scheme is to operate.
Similarly guidance is given in relation to employees on fixed term contracts. If their contract expired after 19 March 2020 and there had been an RTI payment submission for that Employee prior to 19 March 2020, then the individual is capable of being furloughed by re-employment, or simply extending the contract. The Guidance Note points out that employees who joined on or after 29 February 2020, and the contract ended before 19 March 2020, will not qualify for the Scheme. This is a general point rather than a point specifically in relation to fixed term contracts.
We were already aware that employees who were shielding, and so unable to work, could be furloughed. The Government has now moved to make the point even clearer by expressly indicating that employees who are shielding "in line with public health guidance" can be furloughed. This is permissive. An employer can furlough an employee who is not shielding in line with public health guidance under general principles. So the Guidance Note is simply indicating that even employees who are shielding in line with the public health guidance can be furloughed.
However, that brings us onto one of the less helpful developments, or rather lack of development. The guidance in relation to employees who are on sick leave at the time that the employer wishes to put them on furlough has not been altered. As we indicated in our previous advice on the Guidance Notes this means that the Guidance and the Direction are clearly contradictory.
Some clue to the Government's thinking perhaps can be gleaned from the other major unknown, namely the issue of consent and whether an employer is required to obtain an employee’s consent to being furloughed (assuming that there are no other adverse changes).
On this subject the Guidance Note has been altered slightly in the most recent guidance. The relevant paragraph now reads:
"To be eligible for the grant employers must confirm in writing to their employees confirming (sic ) that they have been furloughed. If this is done in a way that is consistent with employment law, that consent is valid for the purpose of claiming through the Scheme. Collective agreement reached between an employer and a trade union is also acceptable for the purpose of such a claim. There needs to be a written record but the Employee does not have to provide a written response. A record of this communication must be kept for five years." [emphasis added]
We therefore remain in the surprising position that the Direction, which expressly envisages agreement from the Employee in writing, and the Guidance Note do not speak with one voice.
Helpfully Daniel Barnett's employment law bulletin published a letter which he received from HMRC in response to a query he had raised on this. They key parts of the letter state:
"HMRC will act at all times in accordance with the Direction. HMRC's interpretation of the Direction is set out in our published guidance. It is our expectation that customers should consider the Guidance in the first instance when seeking to understand the operation of the Scheme and HMRC's interpretation of the Direction.
You have asked for clarification about the requirement for the employer and employees to agree to commence furlough. I can confirm that we stand by the interpretation that we have articulated in our Guidance which is consistent with the Direction. … Put simply the Employer and Employee must reach an agreement and an auditable written record of this agreement must be retained. It does not necessarily follow that the Employee will have provided written confirmation as such that an agreement was reached in all cases".
The obvious interpretation of this is that HMRC are going to insist that the Guidance Note and the Direction are both saying the same thing (when it is clear they are not). Some may be tempted to assume that Humpty Dumpty is now working for HMRC given his famous comment “When I use a word… it means just what I choose it to mean — neither more nor less”. However it does seem to make it much harder for HMRC subsequently to deny anyone's entitlement either now, or during the subsequent audit, on the basis that the employer does not have written proof of agreement from the employee.
However, we do not think it puts beyond doubt the question as to whether or not an employer who instructs an employee to go on furlough has to have a document evidencing agreement. It is understandable that HMRC are focussing on something that is auditable, and this may be the key point. The auditable point is the existence of a written document putting the individual on furlough but we know (from what HMRC have said in the letter) that it does not have to have been signed by the employee. A written communication to the employee placing that individual on furlough has always been an essential part of making a claim under the Furlough Scheme.
But what does HMRC mean by saying that the employer and employee must reach an agreement? If the employer unilaterally instructs the employee to go on furlough, can the employer rely on the lack of objection from an employee to that instruction, to go on furlough, coupled with acceptance of salary during the furlough period, as amounting to sufficient agreement for these purposes? Is HMRC saying that if the furloughing is done and it is "consistent with employment law" that is good enough for their purposes? They will have the auditable written document and don’t need to see evidence of consent from the employee. However, this seems to confuse agreement to being furloughed with the rather different question of whether the employer has authorisation under the contract of employment to furlough the employee. It is looking increasingly as though the written record is the key document (with no need for written proof of consent), and the issue of agreement by the employee is being downgraded. Why the Direction cannot be amended to make the point clear is beyond mere mortals comprehension.
In the circumstances there will remain a residual risk that there is a need for an agreement to be furloughed and a mere written instruction to be furloughed might be challenged. However, employers who have already furloughed staff, with no other adverse changes and without consent and who are still troubled about the point, may take some comfort from HMRC's letter, which was published with their authorisation. The pros and cons of taking action to regularise the position, potentially through retrospective consent, remain as set out in our previous note: Fourth Time Around: More UK Furlough Scheme Updates.
Going back to the issue of sick pay, if HMRC are insisting that there is no difference between the Guidance Note and the Direction on the issue of whether or not the employer needs written consent from the employee, then presumably the same insistence will apply to the issue of whether the employer can furlough an employee on sick leave. On that basis employers should point to the Guidance Note and rely firmly on that to substantiate their claim in respect of that employee.