Don’t fall foul of furlough

Thousands of firms across the country could face legal action for breach of contract if they don’t apply furlough rules correctly in a bid to survive the Covid-19 crisis.

That is our stark warning as we begin free introductory guidance sessions for companies.    

Director Daryl Cowan says having a written agreement in place is essential as furlough constitutes a change in status under employment law.

Daryl said: “Placing an employee on furlough leave means you are directly changing their terms and conditions of employment.”

“Most workplace contracts do not permit an employer to reduce pay, provide no work, or change status, without agreement.

“Given the immediacy of the virus impact on businesses of all sizes and in all sectors, employers are quite naturally reaching for any financial lifeline offered by government.

“Under the Coronavirus Job Retention Scheme, employers can apply for a grant to cover up to 80% of the wages of retained staff put on furlough who would otherwise be made redundant. The maximum is £2,500 a month.”

“This is a tempting option for both employer and employee when they are faced with the bleak alternatives of unpaid leave, lay-off, redundancy or dismissal.”

“We can assume that most employees offered furlough will want to take it up but it’s not enough legally to just have a verbal or informal say so.”

“If an employee changes their mind later and there is no written agreement in place, the risk is that they could sue their employer for breaching the underlying employment contract.

“To stay on the right side of the law, the employer must first consult with the employee and gain their consent.

“Once that is done, the furlough leave agreement must be put in writing, with a clear statement setting out how long it is likely to last for.”

Daryl added that employers must devise fair, non-discriminatory criteria for selecting employees for furlough. 

“The basis for any selection criteria will vary from workplace to workplace,” he said. “This is not an easy situation, but so long as a fair process is used then the employer is within their rights to offer furlough to some employees and not others.” 

“However, great care is needed if a mix of options are being considered across a workforce. If the process is not handled correctly, it could easily lead to unfair dismissal or discrimination claims.”

DC Employment has begun offering one hour’s free guidance on the application of the Coronavirus Job Retention Scheme. 

We have also posted a free download template of a furlough agreement along with a comprehensive set of frequently asked questions and answers covering all aspects of the business impact of the pandemic. For details, visit here.

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