Australia: High income threshold now $153,600

From 1 July 2020, the high income threshold will be increased to $153,600. This amount is significant for 3 reasons:

  • Unfair dismissal eligibility: Employees may have access to unfair dismissal if their annual rate of earnings is less than the high income threshold.
  • Unfair dismissal compensation cap: Half the amount of the high income threshold represents the cap on the amount of compensation available in unfair dismissal proceedings ($76,800 from 1 July 2020).
  • Guarantee of annual earnings: Employers can exclude award conditions by providing a guarantee of annual earnings to award-covered employees who have an annual rate of earnings which exceeds the high income threshold.

 

Also note: From 1 July 2020, the national minimum wage is $753.80 per week (or $19.84 per hour) following the 2020 Annual Wage Review decision (on 19 June 2020). The national minimum wage for casual employees will be $24.80 per hour (based on a 25% casual loading).*

*These rates arise from the Fair Work Commission’s Annual Wage Review decision dated 19 June 2020.

Continue reading

UK Covid-19: new Treasury Direction on Coronavirus Job Retention Scheme from 1 July 2020

The Government has today published a further Treasury Direction dated 25 June 2020 setting out the legal framework for claims under the Coronavirus Job Retention Scheme (CJRS) in respect of periods from 1 July 2020.  This gives effect to the Guidance amended on 13 June to cover “flexible furlough” (summarised here).  From 1 July 2020, employers will be able to claim in respect of employees who have been furloughed fully or partially (for any amount of time and work pattern) under the terms of the new Direction, provided that:

  1. they have previously made a claim under the original, pre-July CJRS for the relevant employees for a consecutive 3 week period of furlough completed within the period 1 March to 30 June (subject to exemptions for individuals in certain circumstances), and
  2. the number of employees who can be claimed for cannot exceed the maximum number in any one claim made for furlough periods prior to 1 July, called the “high-watermark number” (save that individuals exempt from the first condition can be added on to this number).

The 13 June Guidance exempted from the first condition any individuals returning from maternity, shared parental, adoption, paternity or parental bereavement leave, who were on payroll on or before 19 March 2020 and on leave before 10 June 2020, provided the employer met the condition for other employees.  An amendment to the Guidance on 19 June added military reservists, returning from mobilisation after 10 June 2020, to the exemption on the same basis.  The employer’s “high-watermark number” cap on future furlough numbers is increased by the number of any such “returning employees” (but there is no requirement to actually furlough these individuals).  Provisions to this effect are now included in the new Direction.

There are similar provisions where a TUPE transfer takes place after 10 June 2020, in relation to transferring employees who were furloughed by the transferor under the original CJRS (but who cannot satisfy the first condition as regards the transferee).  The Direction confirms that the number of these previously-furloughed, transferring employees is added to the transferee’s “high-watermark number” cap in the same way as “returning employees”. (The Direction does not appear to give any effect to the ambiguous comment in the Guidance that “this is subject to the maximum cap the previous employer was subject to”.  This could have meant that if, say, 40 of the transferring employees had at some time been furloughed, but at different times so that the maximum number of these employees included by the transferor in one single claim was 30, only 30 would be added to the transferee’s “high-watermark” cap, or alternatively that the transferor’s own “high-watermark” number in respect of its entire workforce (including those not transferring) was to be added to the transferee’s cap.  Hopefully the Guidance will now be amended to remove this comment.)

The Direction replicates most of the provisions of the earlier Directions governing the pre-July CJRS, including those on the calculation of reference salary and the requirement not to work during furloughed hours.  A large part of the new Direction details complex calculations required to work out “usual hours” and “furloughed hours” in relation to claims for partial furlough.  Although employers are likely to find the Guidance on this slightly more user-friendly than the Direction, it would come as no surprise if the complexity persuaded some employers to continue fully furloughing employees on a rota basis rather than switch to partial furlough.  The new Direction also provides for the tapering of the financial support available to employers from August through to the end of October, as previously announced.

A key point concerns the arrangements that must be made to agree furlough under the new Direction. The drafting of the amended Guidance was unclear as to whether, to be eligible to claim for partial furlough, a written agreement with the employee was required, whereas an oral agreement confirmed in writing by the employer was acceptable for full furlough claims without any need for a written response from the employee.  The Direction now makes clear that there is no such distinction – to be eligible to claim for either full or partial furlough, an oral agreement can be reached with the employee and then confirmed in writing (which can include email) by the employer.  Employers should note that there is a new express requirement that the agreement must have been made (but not necessarily confirmed) before the beginning of the claim period – retrospective agreements will not be sufficient.  However, the Direction confirms that an agreement can subsequently be varied to reflect any variation agreed during the period to which the claim relates. Again, it would be helpful if the Guidance were amended to conform.

We will be publishing an updated version of our client briefing on the CJRS shortly.

 

In other recent developments :

  • HMRC has published a new web page on how employers can pay all or some of the CJRS grant back if it has been overclaimed;
  • guidance on the taxation of expenses where employees work from home due to coronavirus has been published here;
  • relaxations to lockdown announced from 4 July are summarised here and updated working safely guides for employers, including for those in business sectors permitted to reopen from 4 July, can be found here;
  • the Prime Minister has announced plans to “pause” the shielding programme for the clinically extremely vulnerable in England on 31 July 2020 unless there is a “significant rise in cases” in the meantime.  This is likely to mean that shielding employees will not be entitled to statutory sick pay if continuing to shield from 1 August. The press release states that “the government is asking employers to ease the transition for their clinically extremely vulnerable employees, ensuring that robust measures are put in place for those currently shielding to return to work when they are able to do so.  For anyone concerned about returning to work once the guidance has eased, we recommend they speak with their employer to understand their specific policies in relation to COVID-19. We advise they discuss their situation, agree a plan for returning to work and adjustments that may be needed before they return.”
  • the Information Commissioner’s Office has published further guidance on data protection covering issues such as mandatory workplace testing and what information should be provided to employees about results from a commissioned testing service.  The ICO has also produced advice on issues around home working.

 

Australia: Victoria’s new wage theft bill – what does it mean for employers?

Background

The Victorian Wage Theft Bill 2020 (the Bill) was passed by both houses of the Victorian Parliament on 16 June 2020. The Bill imposes significant penalties, including jail time, against employers who underpay their staff. The Bill has been in the making for a number of years, and was a key election promise for Daniel Andrews’ Labor government as it went into the 2018 state election.

Once the Bill has received Royal Assent from the Governor, it will become the Wage Theft Act 2020 (Vic). However, it is possible that it may be some time before it comes into in effect. The Act will not commence until 1 July 2021, unless commenced earlier by proclamation.

What does the Bill propose to do?

The Bill creates criminal offences relating to:

  • employers underpaying employee entitlements; and
  • employer record keeping regarding employee entitlements.

It also establishes the Wage Inspectorate Victoria.

Wage theft offences

What are the offences?

Employers must not dishonestly:

  • withhold the whole or a part of an ‘employee entitlement’ owed by the employer to the employee; or
  • authorise or permit, expressly or impliedly, another person to withhold the whole or part of an employee entitlement owed by the employer to an employee.
… and the penalties?
  • In the case of a body corporate, 6000 penalty units (approximately $991,000).
  • An individual officer of an employer who is convicted of an offence can be sentenced to up to 10 years imprisonment.
What are ‘employee entitlements’?

For the purposes of the Bill, employee entitlements mean any amount (or any other benefit) payable or attributable by an employer to, or in respect of an employee in accordance with relevant laws, contracts, or agreements. Employee entitlements includes, wages, salary, allowances and gratuities. It also includes the attribution of annual leave, long service leave, meal breaks, and superannuation.

What constitutes an employer “authorising or permitting” another person to withhold the whole or part of an employee’s entitlement?

The Bill gives three examples of how authorisation or permission could be established. They include (but are not limited to):

  • proving that the employer or an officer of the employer gave that authorisation or permission (whether expressly or impliedly);
  • in the case of an employer that is a body corporate, proving that the employer’s board of directors gave that authorisation or permission, whether expressly or impliedly; and
  • in the case of an employer that is not a natural person, proving that a “corporate culture” existed within the employer that directed, encouraged tolerated or led to the relevant conduct being carried out?
What sort of ‘corporate culture’ authorises or permits underpayments?

For the purposes of the Bill, ‘corporate culture’ in relation to an employer’s business means an attitude, policy, rule, course of conduct or practice existing within the employer generally or in the part of the employer in which the relevant conduct is carried out or the relevant intention is formed.

Examples of this could be internal policy (written or otherwise), or accepted conduct within a business of:

  • not paying retail employees if they work beyond rostered hours when closing up the shop;
  • a restaurant ‘charging’ an employee for dropping food or product through a deduction from their wages;
  • unapproved ‘training wages’ which result in an employee being paid below award, agreement, or contractually agreed rates;
  • unpaid internships at a corporate head office (that is not a vocational placement).
What about ‘rogue’ employees or management underpaying employees?

There is a defence for employers, if they can prove that they exercised due diligence to prevent the authorisation or permission being given to withhold wages.

If, however, an employer has failed to comply with the requirements of a regulator (for example, the Fair Work Ombudsman) it will be taken as evidence that the employer had not taken all reasonable steps to pay or attribute the employee entitlements to the employee.

How is this different from employer obligations under existing legislation, awards, agreements and contracts?

A key difference between the Bill and underpayment provisions in the Fair Work Act 2009 (Cth) (FW Act), is that the Bill requires dishonest intent.

Federal underpayment provisions are strict liability provisions, which means that it doesn’t matter whether the employer intended to underpay an employee, or whether it was an accident, a Court is still entitled to order the employer pay back any amount underpaid (and impose penalties for breach).

Times have been tough – what if the employee agrees to the reduction?

In determining if any withholding of employee entitlements is dishonest, consent by or on behalf of the employee to the withholding is irrelevant if the withholding reduces the employee entitlement to less than the minimum amount or benefit required under relevant laws.

Record keeping offences

What are the offences?

Employers, or their officers, must not:

  • falsify, or expressly or impliedly authorise or permit another person to falsify, an employee entitlement record in respect of an employee, or
  • fail to keep, or expressly or impliedly authorise or permit another person to fail to keep an employee entitlement record in respect of an employee,

with a view to dishonestly:

  • obtain a financial advance for the employer or another person; or
  • prevent the exposure of a financial advantage obtained by the employer or another person.
… and the penalties?

In the case of a body corporate, 6000 penalty units (approximately $991,000) or, individuals are subject to a maximum of 10 years imprisonment.

Application

How will this work with our national workforce?

This diagram outlines how the Bill will apply to employee entitlements payable to employees across your workforce.

 

How does this interact with our current obligations under other acts, awards, and agreements?

The Bill, once enacted, will run alongside all other obligations an employer has under federal laws and industrial instruments that it is subject to.

There is a risk that the Bill could be subject to constitutional challenge, and overridden by its various federal counterparts, namely the FW Act.  The FW Act specifically excludes all State or Territory industrial laws so far as they would otherwise apply in relation to a national system employee or a national system employer.

The FW Act definition of a State or Territory industrial law includes one which applies to all employees in the State or Territory, and has one or more of the following as its main purpose:

  • the establishment or enforcement of terms and conditions of employment;
  • the making and enforcement of agreements (including individual agreements and collective agreements), and other industrial instruments or orders, determining terms and conditions of employment; or
  • the provision of rights and remedies connected with conduct that adversely affects an employee in his or her employment.

The Bill could arguably fall into any of the above categories.

Should the Federal Government introduce its own laws criminalising underpayments (as it has indicated it will be doing over the past 10 months) it will be even more difficult for the Bill to function as intended, if it is inconsistent with the Federal Government’s underpayment laws, as the federal law will override any discrepancy between the two. If an employer were to be prosecuted simultaneously at both a federal and state level, constitutional issues may arise.

Wage Inspectorate Victoria and Commissioner

What is the Wage Inspectorate Victoria?

The Bill will establish the Wage Inspectorate Victoria (WIV). The WIV will educate, promote compliance, investigate possible offences, and bring criminal proceedings in relation to alleged employee entitlement offences, among other things.

What can it do?

The WIV will have the power to do all things necessary to perform its duties and functions (being, education, investigation, and bringing criminal proceedings).  Their powers include the ability to compel an employer to produce documents, or attend the WIV.

The WIV can also appoint people to act as inspectors.

What can inspectors do?

Among other things, inspectors can exercise entry, search, and seizure powers. They can also require a person to answer questions or produce documents at the following premises:

  • a workplace;
  • the registered office of a body corporate; or
  • premises at which work is carried out or records or kept, which the inspector reasonably believes may be relevant to the commission or possible commission of an employee entitlement offence.

Inspectors are entitled to enter premises to search and seize with consent, subject to fulfilling certain requirements (including informing the owner/occupier of the purpose of the search and the owner/occupier’s rights in the situation, and having the owner/occupier sign an acknowledgement to this effect).

Inspectors are also entitled to enter a premises without consent and without a search warrant to search and seize if they enter at a reasonable time and reasonably believe that:

  • there are documents regarding the commission or possible commission of an employee entitlement offence; and,
  • that the owner/occupier would not consent, and either
  • the inspector has provided a notice in advance; or
  • the inspector believes on reasonable grounds that a delay in the entry is likely to result in the commission of an employee entitlement offence, or concealment, loss or destruction of evidence.

Inspectors can also enter a premises to search and seize with a search warrant, in accordance with their obligations under said warrant.

Next steps

What should my business do?

Now is as good a time as ever to manage any underpayment risks.

Employers should ensure that:

  • employees are being paid appropriately, with reference to the applicable award, agreement, and/or contract of employment;
  • employee records are being kept and maintained in accordance with FW Act obligations;
  • roles and positions are regularly reviewed by reference to an employee’s duties, to make sure employees are appropriately classified (and as such, that any salary review is correct);
  • all employees are included in a salary review (even salaried employees, and middle or upper management);
  • the corporate culture of the company is not one which would authorise or permit underpayments;
  • HR, management, payroll, and any other employee with oversight to employee pay, are provide with appropriate training in compliance with applicable workplace laws.

This article was written by Anthony Wood, Partner and Deanna Carlon, Solicitor.

Continue reading

UK COVID-19: Chancellor confirms changes to Coronavirus Job Retention Scheme

The Chancellor has this evening confirmed the following changes to the Coronavirus Job Retention Scheme (CJRS):

  • Claims for periods after 30 June 2020 will only be possible from employers who have previously used the scheme in respect of employees they have previously furloughed for a 3 week period ending no later than 30 June – the latest an employee can be placed on furlough for the first time is therefore 10 June 2020.  Employers will have until 31st July to make any claims in respect of the period to 30 June. (As yet there is no detail as to whether there will be an exception for TUPE transferees unable to comply with this deadline in respect of furloughed transferring employees.)
  • Partial furlough will be possible from 1 July 2020, rather than August as originally announced.  From 1 July, employers will be able to claim in respect of previously furloughed employees either for full furlough, or for partial furlough where employees work part of their normal hours.  The employer must pay wages and employer NICs and pension contributions for the hours worked, and can make claims under the CJRS in respect of the normal hours not being worked.  There is no restriction on the working hours or shift pattern but employers must agree the arrangement with their employee and confirm that agreement in writing.  The minimum period for a claim will be a week (ie, the furlough arrangement agreed between employer and employee and reported in a claim to HMRC must cover a period of at least one week, although the claim could be in respect of wages for only part of a week where the employee is working part of their normal hours).  Further details will be included in future guidance to be published on 12 June.
  • For July, the CJRS grant will continue to cover 80% of wages for unworked hours (subject to the monthly cap of £2,500 or, for partial furlough, a proportionate cap reflecting the hours not worked), plus associated employer NICs and pension contributions.
  • For August, employers must pay the employer NICs and pension contributions for the hours not worked;  the CJRS grant will continue to cover 80% of wages subject to the cap.
  • For September, employers must contribute 10% of the capped wages (plus employer NICs and pension contributions) with the government paying 70% of capped wages for the hours the employee does not work (so the employee continues to receive 80% wages subject to the cap).
  • For October, the employer contribution increases to 20% (plus employer NICs and pension contributions) and the government contribution reduces to 60% of capped wages.
  • Employers can continue to top up wages to 100% if they wish.
  • The scheme will close on 31 October 2020.

The press release is here and a fact sheet with further details here.

We have updated our client briefing on the CJRS to cover these changes, available here.

Anna Henderson
Anna Henderson
Professional Support Consultant, London
+44 20 7466 2819

Australia: In the Rossato decision, the Court confirms overall relationship is still critical in determining casual employment; rejects ‘double dipping’ argument

In the long awaited decision of WorkPac Pty Ltd v Rossato [2020] FCAFC 84, the Full Federal Court finds ‘casual’ WorkPac employee entitled to leave and holiday payments.

Background

Robert Rossato was employed by labour hire company WorkPac Pty Ltd (WorkPac) as a casual coal mining worker across companies within the Glencore Group from 28 July 2014 to 9 April 2018.

After his employment ceased, Mr Rossato asserted that, contrary to WorkPac’s characterisation of him, he had not been a casual employee. He claimed outstanding entitlements to paid annual leave, paid personal/carer’s leave and paid compassionate leave under the National Employment Standards (NES), as well as public holiday pay entitlements under the WorkPac Pty Ltd Mining (Coal) Industry Enterprise Agreement 2012 (the 2012 EA).

WorkPac commenced proceedings in the Federal Court of Australia, seeking declarations that Mr Rossato was a casual employee for the purposes of the NES and under the 2012 EA. The effect being that he was not entitled to paid leave and public holiday payments. In the alternative, WorkPac argued that it could recover certain payments that had been made to Mr Rossato on the assumption that he was a casual employee.

In a long awaited decision handed down on 20 May 2020, Justices Bromberg, White and Wheelahan delivered separate judgments, all concluding that Mr Rossato was not a casual employee for the purposes of the NES, nor under the 2012 EA. Accordingly, Mr Rossato was entitled to paid annual and personal/carer’s leave, compassionate leave and public holiday payments. There was no entitlement to set off or otherwise recover payments that had been made to Mr Rossato on the basis that he was a casual employee.

Casual or permanent?

WorkPac accepted that the Full Federal Court’s earlier decision in Skene1 had been correct in finding that the term ‘casual employee’ when used in the NES has the general law meaning, and that the touchstone of the general law meaning was ‘the absence of a firm advance commitment as to the duration of the employee’s employment or the days (or hours) the employee will work’.

In Skene, the Full Federal Court assessed the existence of the ‘firm advance commitment’ by considering the ‘totality of the relationship’, having regard to the conduct of the parties, including the real substance, practical reality and true nature of the relationship. In Rossato, WorkPac invited the Court to depart from that approach, and to assess casual employment by reference solely to the terms of the written contract upon its commencement.

While the Court indicated that it was not wrong to look at the ‘totality of the relationship’, it was not necessary to ultimately determine this issue. That was because even accepting WorkPac’s pure contractual assessment approach, Mr Rossato’s employment amounted to a firm advance commitment, meaning he could not be a casual employee.

Factors leading the Court to this conclusion included:

  • Mr Rossato was contractually required to complete an ‘assignment’ once he accepted it, and he was liable to a financial penalty if he failed to do so. The ‘assignment’ was of an indefinite duration because he was told that the initial 6 month period was a guide only;
  • Mr Rossato was required to serve a ‘6 month minimum qualifying period’;
  • Mr Rossato’s employment continued indefinitely, subject only to termination on notice; and
  • the stable, regular and predictable nature of Mr Rossato’s employment, as prescribed by the annual rosters that Mr Rossato was contractually required to work. These rosters indicated a mutual understanding that the employment offered was organised, structured, ongoing, regular and predictable.

These factors pointed to a conclusion that the employment was not intermittent, irregular or informal and unlikely to continue. Had it been necessary for the Court to consider the ‘totality of the relationship’, the matters identified above also supported a finding of permanent employment. This was reinforced by the manner in which the contracts were performed, including the fact that Mr Rossato:

  • was given the annual rosters in advance and was told that he was to work in accordance with the roster (that is, the function of the roster was to assign work to Mr Rossato);
  • was issued timesheets that were pre-populated with his shift pattern;
  • was never asked whether he intended to attend on a day that he was rostered, and there was a corresponding absence of any meaningful mechanisms by which Mr Rossato was able to accept or reject shifts; and
  • lived over an hour’s drive away and was provided with on-site accommodation. This was inconsistent with an expectation that the employment was intermittent and Mr Rossato having a choice of whether to reject work on a particular day.

The ‘Set-Off’ Claim

WorkPac said that if Mr Rossato was not a casual employee, it should be entitled to have two payments brought into account in discharge of its obligation to pay Mr Rossato his leave and public holiday entitlements.

The first was the amount that it had paid Mr Rossato which exceeded the rate of pay applicable to a permanent employee under the 2012 EA (Overpayment). WorkPac sought to recover this on the basis that the parties had failed to create the type of relationship that they had intended, and therefore, the purpose of this payment did not need to relate to the entitlements being claimed. The second was the casual loading which WorkPac said had been specifically paid in lieu of the leave entitlements now being claimed.

The Court unanimously found that a ‘set off’ was not permitted in either case because there was not a sufficiently ‘close correlation’ between the purpose of the payments and the entitlements being claimed. In respect of the casual loading, the Court found that it had been provided as a substitute for leave, so could not later be assigned to discharge the obligation to provide that leave.

The Court was also unanimous in finding that WorkPac’s reliance on the ‘double dipping’ provisions of the Fair Work Regulations 2009 (Cth)2 was misguided. This was because the regulation only applies when the employee makes a claim to be paid an amount in lieu of one or more of the relevant NES entitlements. As Mr Rossato sought payment of the NES entitlements, not payments in lieu, the Regulation did not apply. In any event, Justice Wheelahan found that the Regulation did not affect the substantive law of ‘set off’ that remains applicable to the determination of such a claim.

The restitutionary claims

WorkPac argued that it was entitled to restitution of the Overpayment or, in the alternative, the casual loading because:

  • it had been mistaken as to the proper characterisation of the employment; or
  • those payments had been made in consideration for a purpose which had failed.

Although they each rejected the ‘mistake’ claim, the approach of the three judges differed, with the exception of one fundamental issue upon which they all agreed: even if WorkPac could demonstrate that it was operating under a mistake, it was not so fundamental that the basis for the contract wholly failed. That is, the contract was not alleged or demonstrated to have been void as a result of the mistake.

That same issue also defeated WorkPac’s ‘failure of consideration’ claim. The Court unanimously finding that the remuneration paid to Mr Rossato was not divisible merely because an assumption which may have formed part of the calculation of the agreed hourly rate of pay did not exist. WorkPac had agreed to pay Mr Rossato his hourly rate in order to secure the performance of work by Mr Rossato. There had been no failure of that object.

What does this mean for employers?

The calls for legislative reform are already coming from employer groups in search of clarity, with proposals to redefine the meaning of a ‘casual employee’ under the Fair Work Act. In the absence of legislative clarity, employers should endeavour to:

  • use casuals only where the employment is truly intermittent, irregular, informal and unlikely to continue for any length of time;
  • offer employment to casuals on a daily or shift basis only, and ensure that there are appropriate mechanisms for the employee to elect whether or not to work on each day or shift;
  • ensure that the express contractual arrangements reflect the arrangements identified above;
  • ensure a casual employee’s rate of pay reflects a separately identifiable casual loading;
  • consider contractual provisions that expressly permit the recovery of the casual loading if the relationship is subsequently found to have been mischaracterised; and
  • avoid casuals working patterns of stable, regular and predictable employment.

Endnotes

  1. Reg 2.03A.
  2. WorkPac Pty Ltd v Skene (2018) 264 FCR 536 (Skene).

This article was written by Dean Farrant, Special Counsel and Georgina Langford, Graduate.

Continue reading

UK COVID-19: new Treasury Direction (published 22 May) amends Coronavirus Job Retention Scheme

On Friday 22 May 2020 the Treasury published a further Direction (dated 20 May) modifying the legal framework for the Coronavirus Job Retention Scheme (CJRS).  Claims for payment under the CJRS made after the publication of the further Direction on 22 May will have to comply with the new, amended version of the Schedule.  Claims made on or before 22 May should comply with either the original Schedule published on 15 April or the new Schedule (as a whole).  The 20 May Schedule extends the scheme until 30 June 2020 so a further Direction will be needed for the extension of the current terms until 31 July, and for the new terms applicable from August (which are expected to be announced towards the end of next week).

Many of the changes are on issues where the 15 April Schedule conflicted with HMRC’s published Guidance and have now brought the Schedule into line with that Guidance or clarified areas of uncertainty.  There are also some new provisions, which presumably will be reflected in further iterations of the Guidance in due course.

Perhaps most significant is the amendment to the requirements for placing an employee on furlough. The 15 April Schedule required a written agreement between employer and employee that the employee would cease all work in relation to their employment, whereas the HMRC’s Guidance initially suggested that only written confirmation of being furloughed was required for the purposes of eligibility under the CJRS, and subsequent versions stated that furloughing should be consistent with employment law but didn’t otherwise need a written agreement.  The 20 May Schedule now provides that, for the purposes of eligibility to make a claim, the required instruction to cease work is satisfied if:

  • the employer and employee have agreed that the employee will cease all work in relation to their employment – and this can be made by means of a collective agreement between employer and trade union
  • the agreement/collective agreement specifies “the main terms and conditions upon which the employee will cease all work” (presumably it would be sufficient to set out the extent to which the pre-furlough terms and conditions have been varied, eg agreed reductions in pay or benefits, and perhaps also the extent to which the employee is permitted to work for other employers or can study or volunteer during furlough)
  • the agreement is incorporated expressly or impliedly in the employee’s contract
  • the agreement is in writing or is confirmed in writing by the employer (and writing includes in electronic form)
  • the employer keeps the agreement/collective agreement/confirmation until at least 30 June 2025.

Employers who did not obtain written agreements from furloughed employees  (whether because they were not varying any contractual terms, or because changes were agreed orally) will welcome this change for future claims.  They may also be able to rely on the new Schedule in respect of past claims (if those claims complied with all the provisions of the new Schedule). However, employers should note that there is still a requirement for agreement, and for a written record to be made of that agreement (covering both the cessation of work and the applicable terms).  It remains unclear whether the agreement itself can be retrospective or implied (although there is nothing expressly prohibiting this).  It would obviously be prudent to ensure these new provisions are satisfied for newly furloughed employees and to provide written confirmation of the agreement for those already furloughed if this has not yet been done.

Other changes include:

  • it seems that the employer and employee can now agree to end a period of SSP in order to start furlough (notwithstanding continuing SSP eligibility) – this is presumably aimed at allowing employers to agree to furlough individuals whose eligibility for SSP is due to being in the extremely vulnerable category advised to shield (but who are not actually unwell);
  • where a period of unpaid leave started before 1 March, and the employer and employee reached an agreement before 20 March 2020 to end it earlier than originally planned, the employee can be put on furlough after the revised end-date;
  • no claim under the CJRS can be made for a period of unpaid leave between 1 March and 30 June and furlough cannot begin during that period; there is no express prohibition on ending that leave earlier than planned in order to furlough;
  • a director will not be treated as doing work (and therefore outside the CJRS) where they are simply making a CJRS claim for, or paying wages to, an employee of the company; the carrying out of duties as a trustee or manager of an occupational pension scheme is also permitted (save where the employer’s business is the provision of occupational pension scheme independent trustee services);
  • furloughed employees can now study or do training even if not directly relevant to the employee’s job and agreed in advance – its purpose can be to generally improve an employee’s effectiveness in the employer’s business or the performance of the employer’s business, provided it does not contribute to business activities, generate income or profit, or significantly contribute to the production of goods or services for sale;
  • it is now clearer that, when calculating the reference salary (80% of which is to be paid, subject to the cap of £2,500 per month), benefits provided through salary sacrifice are not included, but variable payments for overtime, timing of shifts or additional duties will be included provided there is no discretion about how the amount is to be calculated;
  • reference salary for those taking furlough after a period of unpaid leave,  paid statutory family-related or sick leave, or other reduced rate paid leave immediately after statutory leave, should be calculated as if the employee had been on paid annual leave receiving normal pay required under the Working Time Regulations during those periods;
  • an employer no longer needs to deduct from the CJRS claim any amount of SSP for which an employee is eligible, even if not claiming it during furlough;
  • the relevant date for TUPE transfers has been changed to 28 February in line with the current Guidance, a new provision extends the CJRS coverage to TUPE business transfers from an insolvent transferor (where the automatic transfer of employment contracts does not apply) and transferors may also be able to claim for employees whose furlough periods do not last 21 days only because of a TUPE transfer.
Anna Henderson
Anna Henderson
Professional Support Consultant, London
+44 20 7466 2819

UK COVID-19: launch of online scheme to reclaim SSP, 5 steps to working safely, new guidance from ICO, EHRC and ACAS

1) This morning the Government announced that an online Coronavirus Statutory Sick Pay Rebate Scheme will be launched on 26 May for small and medium-sized employers to recover Statutory Sick Pay (SSP) payments they have made to their employees due to COVID-19-related absence.

2) Following on from last week’s guidance on creating COVID-19 Secure workplaces, the government has also published “Practical actions for businesses to take based on 5 main steps“.  Action points are given under 5 headings:

  1. Carry out a COVID-19 risk assessment
  2. Develop cleaning, handwashing and hygiene procedures
  3. Help people to work from home
  4. Maintain 2m social distancing, where possible
  5. Where people cannot be 2m apart, manage transmission risk

The government has also updated the guidance for the Access to Work scheme to make clear that eligible disabled employees may claim financial support where they need to work from home as a result of the COVID-19 pandemic

3) The Information Commissioner’s Office (ICO) has published a helpful new set of FAQs for employers on COVID-19 workplace testing.  The ICO accepts that employers will often be able to show a legitimate reason for processing health data in compliance with the GDPR, as long as they are not collecting or sharing irrelevant, inaccurate or unnecessary data.  Employers should carry out, and continually review, data protection impact assessments covering any new testing activity.  Data must be processed securely and kept for no longer than necessary, and transparency will be critical.  Employers should keep staff informed about potential or confirmed COVID-19 cases amongst their colleagues, but should avoid naming individuals if possible, and should not provide more information than is necessary. The ICO notes that the use of temperature checks or thermal cameras on site may not be proportionate if the same results can be achieved through other, less privacy intrusive, means.

4) Acas has recently published guidance on the conduct of disciplinary and grievance procedures during the COVID-19 pandemic, noting that an employer will need to decide if it would still be fair and reasonable to carry on with or start a disciplinary or grievance procedure while employees are furloughed, socially distancing at work or working from home.  Relevant factors include the health and wellbeing of employees, the individual circumstances, sensitivity and urgency of the case, any reasonable objections from those involved, and access to technology and evidence.  The arrangements must allow an employee to fully exercise their right to be accompanied.

Employers should treat with caution the guidance concerning employees on furlough.  The guidance suggests that an employee on furlough can act as investigator, meeting chairperson or notetaker for an employer and can give evidence.  However, in our view, such activities would likely amount to doing “work” for the employer which is prohibited by the terms of the Coronavirus Job Retention Scheme and could therefore break furlough and remove or curtail an employer’s ability to claim reimbursement for those employees under the scheme. The guidance also suggests that only voluntary involvement in a disciplinary or grievance process is permitted while on furlough, which seems odd given it is hard to characterise an employee being subjected to a disciplinary process as “doing it out of their own choice”.

5) Acas has also updated its general COVID-19 guidance for employers and employees and published new guidance on mental health during the pandemic.

6) The Equality and Human Rights Commission has published COVID-19 guidance for employers on avoiding discrimination when making decisions on furlough, redundancy, working from home and so on, as well as specific guidance covering employees who are pregnant or on maternity leave.

UK COVID-19: People: updates to Coronavirus Job Retention Scheme guidance (including overtime pay and holiday)

Yesterday the Government updated guidance on the Coronavirus Job Retention Scheme (CJRS). The guidance has now been split into a number of separate web pages and the text moved between or within pages, but the only substantive changes are:

  1. The guidance now reflects this week’s announcement confirming the extension of the CJRS in its current form until the end of July. “From August, employers currently using the scheme will have more flexibility to bring their furloughed employees back to work part time whilst still receiving support from the scheme. This will run for three months from August through to the end of October. Employers will be asked to pay a percentage towards the salaries of their furloughed staff. The employer payments will substitute the contribution the government is currently making, ensuring that staff continue to receive 80% of their salary, up to £2,500 a month. More specific details and information around its implementation will be made available by the end of May.”
  2. There is a new clear prohibition on an employer furloughing an employee and then asking them to “volunteer” for the employer in the same or a different role.
  3. With regard to the meaning of “non-discretionary payments” which should be included when calculating the 80% pay (which can be claimed by the employer under the CJRS, subject to the £2,500 per month cap), the guidance now provides that this only includes payments which an employer has a contractual obligation to pay and to which the employee had an enforceable right.  It notes that “when variable payments are specified in a contract and those payments are always made, then those payments may become non-discretionary“.  Payments for overtime worked are non-discretionary for the purposes of the CJRS when the employer is “contractually obliged to pay the employee at a set and defined rate for the overtime that they have worked“. The focus is therefore on whether the employer is obliged to pay specifically for overtime hours worked, rather than on whether the overtime itself is compulsory and/or guaranteed.  This is a helpful (if somewhat belated) clarification of HMRC’s interpretation of the CJRS conditions.  Employers who have not included these amounts in wages paid and/or claims submitted under the CJRS may need to review the terms of their furlough agreements with employees and/or contact HMRC to determine whether any claim can be amended (and the additional sums claimed paid to the employees if not already done so).  Currently the guidance states that “You must claim for all employees in each period at one time – you cannot make changes to your claim. It is not possible to amend a claim once it is submitted. HMRC are looking to develop a process to allow for amendments to be made.”
  4. The guidance now includes a link to new page setting out the Government’s view on the interplay between statutory holiday entitlement and furlough – see more below.
  5. The guidance now lists the employer’s bank account billing address as required information when making a claim, suggests that employers who do not have an employee’s NI number can make a verification request as an alternative to contacting HMRC, and states that records must be kept for 6 years.

 

Holiday entitlement

Previous iterations of the guidance confirmed HMRC’s view that both statutory and contractual annual leave entitlement continues to accrue during furlough (subject to any agreement to vary the contract to remove contractual enhancement during furlough). HMRC has also made clear that employees taking holiday (including bank holidays) during furlough will not break furlough nor invalidate a claim under the CJRS, and set out its view that the Working Time Regulations require holiday pay to be paid at the normal rate of pay (ie, pre-furlough pay) or, where pay varies, the rate calculated by averaging over the previous 52 working weeks.  However, it was not clear whether the HMRC considered furlough would be broken (or it would be unlawful) if employers required furloughed employees to take holiday during furlough (subject to giving the required notice), either where the holiday was pre-arranged or designated after furlough had started.

The new separate (and non-legally binding) guidance published on 13 May  confirms the Government’s view that holiday can be taken without disrupting furlough and that the employer can continue to claim the 80% grant to cover most of the cost of holiday pay.  It envisages that employers can require furloughed individuals to take holiday subject to the usual notice requirements and suggests that employers should engage with their workforce and explain reasons for wanting them to take leave before requiring them to do so.  However, it also goes on to comment that “the employer should consider whether any restrictions the worker is under, such as the need to socially distance or self-isolate, would prevent the worker from resting, relaxing and enjoying leisure time, which is the fundamental purpose of holiday“.  Of course the same would apply in respect of requiring employees who are not furloughed to take holiday during lockdown.  Later on the guidance notes that ‘in most cases’ furloughed employees will be able to take holiday during the furlough period (see below).

This may indicate the Government’s view that designating holiday during lockdown will generally be effective except perhaps for vulnerable individuals who are following the stronger social distancing guidance, extremely vulnerable individuals who are ‘shielding’, or individuals who are self-isolating due to their or their household having symptoms;  given that ‘social distancing’ is likely to be the ‘new normal’ for some time, it would perhaps be surprising if the social-distancing restrictions on society as a whole were to be treated as sufficient to prevent ‘enjoyment’ of holiday.  However, there is clearly scope for argument, at least until we reach the later stages of the Government’s roadmap out of lockdown. Claims are perhaps more likely where an employer seeks to require furloughed employees to use up their entire year’s entitlement while on furlough.  In practice, employees may accept that a requirement to take a pro rata amount reflecting the expired portion of the leave year is not an unreasonable request.

The guidance also discusses the new right for workers to be able to carry forward some or all of the 4 weeks’ statutory holiday entitlement into the following two leave years where it has not been “reasonably practicable” for the worker to take it due to the effects of coronavirus.  It suggests that factors relevant to what is “reasonably practicable” include:

  • whether the business has faced a significant increase in demand due to coronavirus that would reasonably require the worker to continue to be at work and cannot be met through alternative practical measures
  • the extent to which the business’ workforce is disrupted by the coronavirus and the practical options available to the business to provide temporary cover of essential activities
  • the health of the worker and how soon they need to take a period of rest and relaxation
  • the length of time remaining in the worker’s leave year, to enable the worker to take holiday at a later date within the leave year
  • the extent to which the worker taking leave would impact on wider society’s response to, and recovery from, the coronavirus situation
  • the ability of the remainder of the available workforce to provide cover for the worker going on leave.

It is suggested that workers who are on furlough are “unlikely to need to carry forward statutory annual leave, as they will be able to take it during the furlough period (in most cases at least)”.  One exception may be where, due to the impact of coronavirus on operations, the employer is financially unable to top up the 80% covered by the CJRS to full holiday pay (as required by the Working Time Regulations), in which case the worker would be able to carry over their annual leave.

 

Links to the current guidance:

 

UK: 4 April updates to Coronavirus Job Retention Scheme guidance

On 4 April HMRC added to their guidance on the Coronavirus Job Retention Scheme.  The additional text does clarify a few of the questions as to how HMRC intend the scheme to operate, although inevitably some remain.  The main changes are:

  • in what appears now to be a condition of accessing the scheme, the guidance states that “If you cannot maintain your current workforce because your operations have been severely affected by coronavirus (COVID-19), you can furlough employees and apply for a grant”
  • clarification that the scheme can be used by various types of worker who are not classed as employees for employment law but are on payroll: office holders including directors, LLP salaried members, agency workers employed by umbrella companies and “limb(b) workers”
  • confirmation that employees on payroll on or before 28 February, but who had been made redundant or stopped working for the employer after that date, can be rehired and put on furlough
  • confirmation that employees who have been placed on furlough can take on work for another (unconnected) employer
  • confirmation that employees can be placed on furlough multiple times (subject to a minimum of 3 consecutive weeks each time)
  • further detail that the reference salary (for the purposes of reclaiming 80%, subject to the £2,500 per month cap) is post-salary sacrifice and that it can include “any regular payments [employers] are obliged to pay” including “past overtime, fees and compulsory commission payments” but should exclude “discretionary bonus (including tips) and commission payments and non-cash payments
  • a note that employers must also have enrolled for PAYE online, which can take up to 10 days, as they will need an ePAYE reference number.

Issues that have not yet been clarified in the HMRC guidance include:

  • the position where employees TUPE-transfer to a new employer after 28 February and so were on the transferor’s payroll as at that date (meaning that the transferee cannot furlough them); a Treasury tweet suggests that transferees will be able to use the scheme in these circumstances
  • the extent to which an employer could require an employee to take their accrued holiday entitlement during a period of furlough – Acas has changed its guidance on this but questions remain.

Updated versions of our briefings reflecting the updated HMRC guidance and discussing the remaining questions are available here:

The third in our series of webinars discussing the business challenges presented by the COVID-19 outbreak is covering People: The challenges being faced and takes place tomorrow, Tuesday 7 April at 10.30 UK time.  We will be looking at a number of the key issues currently being faced by UK employers, and the government support that may be available. Among other things, we shall consider key questions for management, including in relation to:

  • handling employee sickness, holiday and self-isolation;
  • the challenges around home working;
  • government financial assistance for temporary work stoppage: the UK government’s Job Retention Scheme (including coverage for pension contributions); and
  • collective redundancies and alternatives for cutting costs (including the scope for employers to reduce or defer pension contributions).

The webinar will be chaired by James Palmer, Chair and Senior Partner of Herbert Smith Freehills, who will be joined by expert colleagues who will share their experience and views on these issues.

Further details, including how to register to attend the webinar, are here.

Please note that a subsequent webinar will look at partial activity and holiday measures, homeworking and key points to bear in mind for collective redundancies in the context of the current crisis across France, Germany and Spain.

Updated insight is available online at our COVID-19 online hub and from your usual contacts at any time.

Click here to see the other webinars in this series.

UK: gender pay gap reporting deadline suspended

Due to the Coronavirus outbreak, the Government Equalities Office and the Equality and Human Rights Commission have this morning suspended enforcement of the gender pay gap deadlines for this reporting year (2019/20). The decision means that there will be no expectation on employers to report their data.  See the announcement here.