The recent Uber judgment in the Supreme Court (full judgement available here) has provided yet more confirmation – if any were needed – that if you have someone working for your organisation as part of your workforce, delivering your products or services to your customers, then they are going to be your employees, or at least your ‘workers’.
In other words, if it looks like a duck, quacks like a duck and walks like a duck, then it’s a duck.
I’ve been surprised for just how long some employers have held out against this simple reality. The law has been fairly clear about this for over a decade now, despite the continued valiant efforts by some employers and their legal teams to resist.
An obvious decision
The Uber decision will not have been a surprise to any employment lawyer, since it is based on a set of previous cases and a clear direction of travel that has been apparent in similar judgments in the last few years. Uber itself would have always known that its model of treating their workers as self-employed was a challenging one under UK law and no doubt they and their lawyers have been preparing for this decision for many years. In some ways, it is surprising that it took this long to be confirmed. But then, it does take a long time for a case to reach the Supreme Court.
Helpfully the latest Uber judgment puts a clear final nail in the coffin of the ‘traditional’ argument that the courts and tribunals should start by taking the contractual documents at face value, only looking for ‘worker’ status if the activities of the parties to that contract differed substantially. These contractual documents of course claimed that the worker was entirely self-employed for all purposes. The Uber case makes clear that the contractual documents are no longer the starting point, and that the courts and tribunals should go straight to the reality of the relationship, day to day.
The ‘Reality Test’
That ‘reality test’ shows these workers are not thousands of mini businesses in their own right, but people who worked for Uber, under a great deal of control.
I have been working with many businesses recently, large and small, to help them review and improve their approach to – and tolerance of – those who ask to work as self-employed contractors. As a very quick rule of thumb:
If the contractor works for other clients at the same time as for you, does the work the way they want to do it, has their own limited company, uses some or all of their own kit, own website, does their own sales and marketing and charges you a fixed price for the project, they are very likely to be self-employed for both tax purposes and employment rights purposes.
If they only work for you, use (some of) your kit, work the way you tell them to, don’t sell their services via their own website or sales activities, and get paid by you by the hour/day/week, then they are very likely to be either your worker or your employee.
Now, there are many slightly different permutations of these two basic positions, but it usually takes me only 1-2 minutes of asking questions to work out whether someone is running their own small business and therefore genuinely self-employed or is working for an employer as their employee/worker.
It’s presented as a complex area of law but I enjoy cutting to the chase and helping my clients keep it simple. I’d love to advise you on your own situation if you’re uncertain or facing challenges: please contact me at .
As we start to contemplate the idea of ourselves and colleagues returning to workplaces, even if this may still be some way off, we all need to prepare ourselves for an uncomfortable ride in places.
I think we will all, at some level, feel a little nervous at the idea of a sudden return to immediate proximity to others. For some of us, we will get over that quickly and enjoy a return to partial ‘normal’. But for others, especially those who have a more anxious personality, it could be really difficult.
Combining my employment law and HR experience with my more recent coaching psychology training, my expectation is that we will see a lot of situations where colleagues are overwhelmed with anxiety and feel unable to heed the recall to return to their physical workplaces. Or, if they do come in, they will find it hard to be there.
There is, of course, quite a lot to be potentially anxious about, such as travelling on public transport, being close to colleagues, close contact with customers and about the sharing of personal health information – just for a start.
With those who are aware of their anxieties and comfortable in expressing them to their manager and colleagues, this may feel disruptive to an organisation but understandable in the circumstances. After all, we’ve all been freaked out to a degree by the COVID crisis. I expect such people will receive some empathy and understanding (at least for a while).
But what life and my own personal development have taught me is that many people are not consciously aware of their anxieties. And then there are those that are (semi) aware, but don’t feel comfortable admitting to such things, particularly not to their line manager or HR, for fear of being perceived as ‘weak’ or somehow ‘less than’. As a man, I feel able to suggest that perhaps quite a few men (sorry, men!) might fall into this category. I will admit that perhaps the ‘old Luke’ would have been such a person.
And it is this potentially huge category – those who are anxious about a return to the workplace but without being aware of that anxiety, or at least not having the capacity to easily admit it to their employer and colleagues – where I see the possibility of a huge amount of dispute, grievances, disciplinaries and, sadly, dismissals.
It doesn’t require much imagination to see how such (perhaps unconscious) anxiety could emerge indirectly in other ways which will provide HR headaches. Anxiety that emerges as a concern around Health & Safety and perhaps around data protection over a person’s personal health data might well develop into grievances and whistle-blowing disclosures. A downright refusal to comply with an instruction to return to work or serve customers face-to-face could eventually become a disciplinary and even a dismissal (alternatively, a constructive dismissal).
We could quite feasibly be up to our necks in grievances and disciplinaries in some workplaces, with the added legal risks associated with such issues, such as unfair dismissal compensation being available to employees from day 1 of employment if the dismissal (or constructive dismissal) relates to any Health & Safety concern that turned into whistle-blowing.
There is a great deal I could go into here, but the short point I want to make is that an orderly and dispute-free return to workplaces is only going to be made possible by how people feel about their return and their safety. That’s going to require heroic levels of great comms and great empathy from line managers, leadership and of course HR.
In particular, when we come across a colleague getting very worked up about Health & Safety, data protection or other legal or compliance issues related in some way to their return to the workplace, I invite us to all say to ourselves “Perhaps this is actually more to do with this person’s underlying anxiety about Coronavirus and their return to work than it is about the actual thing they are complaining about”. And encouraging all line managers to hold the same thought in mind.
And then, rather than just pressing the ‘start’ button on the grievance process or the disciplinary process or the whistle-blowing procedure, instead starting by having an empathetic chat with the employee by asking things like “How are things for you?”, “How are you feeling about the return?”. And normalising their worries by saying things like “I think we all feel quite worried about this” and “Same here”.
Yes, some people will of course become locked into a downward spiral of dispute and conflict with your organisation that will not have a happy ending. You can probably guess who one or two of them might be. A crisis tends to make us revert to the more extreme end of our personality, after all. For them, you may just have to let the process play itself out.
But if, as I suspect, there is a big spike in workplace complaints and disputes as returns to work take place, I am hopeful that the majority of them will come from those who, most of the time, are reasonable, hard-working colleagues who are just really worried about what is going on and have a completely rational fear of illness and death. For them, a great big dose of empathy, understanding and flexibility is the best medicine. And not just from HR, since you probably know all this already, but also from all your line managers and your executives. They may become very frustrated and of course will be battling their own anxieties at the same time.
My view (and I bet you never thought you’d read this in a lawyer’s blog) that it is compassion, not procedure, that is going to be the way to solve many of these disputes.
If you’d like to talk about any these issues, do please get in touch with me.
Our Menzies Law Guide to All Things Furlough went out to you on Thursday with the caveat that Government guidelines on furlough were changing rapidly. Just to prove it, the Government has today updated (or clarified) some aspects of its Coronavirus Job Retention Scheme (CJRS) as follows:
You can re-hire and furlough anyone
CHANGED: (this is a big change) You can re-hire and furlough anyone who was on your payroll on 28 Feb but then left you, for any reason. So it’s not restricted to those you made redundant. So now it could include those you sacked for something else or who resigned.
Employees with caring responsibilities
CHANGED: Employees who are unable to work because they have caring responsibilities resulting from coronavirus (COVID-19) can be furloughed. For example, employees that need to look after children can be furloughed.
CHANGED (the part in bold): You can claim for furloughed employees who are shielding in line with public health guidance (or need to stay home with someone who is shielding) if they are unable to work from home and you would otherwise have to make them redundant.
Definitely no working at all for you while furloughed
CLARIFIED: Furloughed workers definitely cannot work for you (or volunteer for you) in any way. The rules now say that if you have work still to be done (e.g. critical business tasks) then that will have to be done by staff who are not furloughed.
Another job while furloughed?
CLARIFIED: Yes, employees can start a new job when on furlough (meaning they might end up earning 80% of the old salary and 100% of a new one). This was not prohibited in the earlier guidance, but the new guidance expressly allows it. The guidance does say it has to be allowed under the old employment contract, but presumably the old employer can waive that.
CLARIFIED: an employer can reclaim 80% of compulsory (presumably meaning contractual) commission back from HMRC, as well as basic salary. This is good news for car salesmen and estate agents. But it can only be referring to the commission from past sales as the furloughed employees cannot be completing new sales when on furlough.
CHANGED: employers can reclaim 80% of fees (whatever that means) from HMRC. The previous guidance said they could not.
CLARIFIED: the 80% does not include non-monetary benefits (e.g. the value of health insurance or a car).
CLARIFIED (although we all knew this anyway): Company directors can be furloughed. They can still perform their statutory duties, but not other work for the company.
Re-furloughing or rotating
CONFIRMED: Employees can be furloughed multiple times, i.e. they can be furloughed, brought back to work, then re-furloughed (subject to each furlough period being at least three weeks).
NEW: Employers must notify employees of their furlough status in writing (the previous guidance did not require it be in writing) and keep the record of that written notification for five years.
Still no official news on holiday leave…
However, the clever money (i.e. every QC’s blog that we’ve read in recent days) definitely seems to be on the idea of you allowing annual leave to be taken during furlough and paying normal (full) pay for those days, and that this won’t invalidate the furlough. We’ve also seen a very good argument by leading lawyers that says you probably can’t instruct staff not to take holidays during furlough or to postpone them.
We will continue to update you as things change but if you need help or guidance on a specific issue, please contact us on 0117 325 0526 /
This is a long blog post and rather more dry than our usual fayre. But we think you will forgive us, in view of the importance of the topic and our wish to share the following information with you all.
It is hard to imagine that 2 weeks ago hardly any of us had heard of the word ‘furlough’. Now it is part of our everyday language. In this blog we look at what we know so far about this new type of special paid leave and address the common questions that employers are asking about the scheme and its application. We also sum up the recommendations we’re making to our clients.
Information from the Government is changing all the time – particularly the drip-drip detail we’ve been getting about furlough leave. So while the information in this blog was accurate at the time of writing, based on the Government’s 26 March 2020 publication of the rules, it is likely to change to some extent, so it’s not a substitute for taking legal advice based on your own circumstances.
Read on below for our current answers to this list of questions. Or jump down the page to see a specific answer. (* and please note that clarification and updates to some of these points can now be found here *)
The Government are trying to keep the wheels of the UK economy turning and, vitally, protect jobs by introducing a package of measures to alleviate the impact of COVID-19 on businesses across the UK. Chief amongst these is the Coronavirus Job Retention Scheme (‘CJRS’ for ease).
CJRS – What is it and who can participate?
The CJRS enables employers to recover up to 80% of wage costs (up to a maximum of £2,500 per month) for employees who agree to be placed on ‘furlough leave’. This is a new concept and a totally new class of paid leave, where the Government will reimburse the employer for these wage costs. It is a temporary scheme and will currently run from 1 March 2020 for 3 months. It may be extended if necessary.
It has been created to act as an alternative to implementing redundancies, lay-offs, unpaid leave or other measures employers might otherwise need to instigate during the current crisis.
After existing as just a few hazy lines on the Government’s website for a few days, the rules (if we can call them that, given how unclear much of their wording is) was updated on 26 March 2020 and is available here.
Must we consider furloughing as opposed to redundancies?
It is possible that we could see the rise of the argument that a redundancy would be an unfair dismissal if the employer had not considered using furlough prior to making redundancies for staff with 2+ years’ service. This idea is only speculation at this stage, and would probably take many months to emerge from employment case law, but it is worth factoring in. It also makes sense on a moral level.
Which employers are eligible?
The good news is that all UK businesses are eligible to claim under the scheme so long as they operated a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account.
Which types of staff can we furlough?
The Furlough scheme is available to all PAYE employees (including casual employees and zero-hours employees).
Our interpretation of the current CJRS rules (based on the outline published on 26 March 2020) is that ‘workers’ (i.e. those you employ and who you may pay through PAYE but who are not technically your employees – such as casual workers) are not included in the scheme. This is because the rules are very clear that you have to be an employee in order to be furloughed. So if you have casual workers under a contract that says they are not employees, they cannot be included.
The CJRS will also not be available to any of your self-employed contractors (they have the separate scheme for the self-employed, again recently announced by the Chancellor).
With agency workers, the CJRS rules (26 March version) are unhelpfully very unclear in terms of who should place them on furlough and claim their wages. So long as the agency worker is an employee (working under an employment contract that says they are an employee), the rules say they can be furloughed.
However, it is not at all clear whether it is the client/end-user who should furlough them and claim the 80% of wage or the agency itself. Our view is that, in legal terms, it is the agency who is their employer, and so it has to be the agency who places them on furlough. The REC (the recruitment agency’s representative body) has issued advice which suggests they agree with this view, but the official CJRS is unhelpfully really unclear and could confuse a lot of employers on this point.
What about this 28 February cut-off date?
Employees must have been on your payroll by 28 February 2020 in order for you to be able to furlough them. Therefore anyone hired or starting since 29 February are not covered. (Ignore any commentary or advice you may have seen that gives the cut-off date as 1 March – this is wrong.)
We have been asked about new employees who started in late February but who were not added to the employer’s PAYE system until after 28 February. This is another example of where the 26 March CJRS rules are confused and really unhelpful.
While the rules do indeed say “Furloughed employees must have been on your PAYE payroll on 28 February…” they also go on to say “Employees hired after 28 February cannot be furloughed…” (Note the confusion between “on your PAYE payroll” and “hired”.) The second sentence gives the clear implication being that employees hired on or before 28 February therefore can be furloughed.
Our advice is that this will hopefully be cleared up soon, when more detailed rules are published. It would be odd, given the objective behind the policy, for the Government to want to explicitly discriminate between those who had been hired and placed on payroll by 28 February and those who had been hired by 28 February but where the employer had not get got around to adding them to their payroll system.
Our view is that where the rules say “must have been on your payroll” they surely mean “must have started in your employment” – and the author has not considered the implications of their inconsistent wording.
We suggest that if you have anyone who falls into this uncertain situation who you wish to furlough, you check with us at the time. If you do try to furlough them, ensure that the furlough agreement only commits you to paying the employee whatever funds you obtain for their pay under the CJRS, and nothing more. Then your exposure is very limited.
What about employees recently made redundant?
Employees who have been made redundant since 28 February can be furloughed by their former employer if rehired. The Government’s idea is apparently that they cannot be furloughed by a new employer but can be by their former employer.
There is clearly a question of whether the former employer might feel at risk here in the scenario where the furlough scheme ends and they are ‘left’ with still employing someone who they made redundant a few weeks ago. If they still have no need for this employee, do they have to make them redundant all over again? Or could the previous redundancy still count? If yes, would the employer just be able to tell the employee to leave, or would that be an unfair dismissal? What sort of dismissal procedure might be required? If the employee had a few days/weeks less than 2 years’ service at the time of the original redundancy, might they then gain this additional service during furlough and thus become more expensive or risky to dismissal again?
There are so many questions here but sadly the CJRS rules do not give us any of the answers. Going back to normal employment law principles, our best guess here (this week) is that if they had 2+ years’ service at the time of the original redundancy, you could offer to take them on – after having left 2-3 weeks between the original end date and the re-hire date. You’ll need this backed up by an express agreement in the furlough agreement that this is a new hire and does not preserve continuity of employment from the previous employment.
There are alternatives, and additional things to mention if this is something you are grappling with. Get in touch if you’d like more specific advice here.
What costs can employers recover?
The CJRS funds 80% of an employee’s “wage”, up to a cap of £2,500 gross per month per employee. There is no limit on the number of employees or the duration (as yet).
For full-time and part-time salaried employees, the employee’s “regular wage” as at 28 February 2020 should be used to calculate the 80% figure. Fees, commission and bonuses cannot be included.
We are not certain what is meant by ‘fees’. The guidelines are currently silent as to whether pay additions such as shift premia, honoraria and allowances (e.g. car allowance, clothing allowance) come within the definition of “regular wage”. There is the potential for there to be substantial room for future litigation here, so we recommend that employers only commit under a furlough agreement to pay their furloughed employees whatever money they are granted under the CJRS for that person. You may wish to avoid committing to paying a certain sum or specific elements of pay and reward only to find that the CJRS will not fully reimburse you.
The guidance also covers the application of the national minimum wage (NMW) to furloughed employees. It states that, since employees are only entitled to the NMW while doing work, furloughed employees who are not working must be paid at the 80% rate (or £2,500) even if, based on their usual working hours, this would ordinarily take them below the NMW.
However, the guidance goes on to state that if employees are required to, for example, complete online training courses while they are furloughed, then they must be paid at least the NMW for the time spent training, even if this is more than the 80% of their wage that will be subsidised. The employer must fund any difference.
As for employees whose pay varies, if they have been employed for at least a year the employer will be able to claim for the higher of (a) their earnings in the same month the previous year and (b) their average monthly earnings in the 2019/20 tax year.
If they have been employed for less than a year, the employer will be able to claim for an average of the employee’s monthly earnings since they started in this job. In the case of an employee who only started in February 2020, the employer will be required to pro-rate the employee’s earnings so far.
(It is confusing that here the word “earnings” as opposed to “wage” is used. We can only assume that the author of the guidelines intended this to mean the same thing, but it again introduces uncertainty.)
The guidelines are largely silent on whether an employer must continue to provide benefits during furlough but it appears likely that the answer is going to be yes, they must be continued unless your furlough agreement specifically agrees that they will not.
If an employee wishes to suspend or end their auto-enrolment employee pension contributions during furlough, they will need to ask to opt out, using the normal opt-out rules.
NIC and pension contributions
Employers can claim the cost of employer’s NIC and employer’s auto-enrolment pension contributions (at the minimum rate) for the 80% of wage cost (but not in respect of any voluntary top-up of pay by the employer).
Does the employer have to top up the employee’s pay to 100%?
No, but some employers may wish to make up the shortfall. Where an employer cannot do so (and many will not be able to), this should be made clear to all employees concerned. Our recommendation is to be consistent!
What do employers need to do to place someone on furlough?
First, employers will need to agree which employees they wish designated as ‘furloughed workers’. An employee cannot insist on being a furloughed worker unilaterally. It must be by agreement.
Since placing someone on furlough represents a variation (albeit a temporary one) to their contract of employment, normal employment law still applies. Therefore, unless you are an employer with a contractual lay-off clause in your employees’ contract of employment, employers still need to consult with staff with a view to seeking their agreement before placing them on furlough leave.
We recommend that employers put in place a clear written furlough agreement with each furloughed employee. We have been putting together many furlough letters and agreements over the last week. We’ve rapidly developed a lot of knowledge of furloughing, so please contact us if you need some help.
How do I choose who to furlough?
In your organisation there are likely to be some employees who are continuing to work, receiving either full or reduced pay, while others will be on furlough leave, getting paid at least 80% for effectively doing nothing. It is likely that this may cause some resentment (hence why we suggest you consider rotating furlough leave). It is important to listen to employees’ concerns here.
We do not agree with comments we have read elsewhere that employers should undertake formal selection or consultation processes for deciding who to furlough, as you would with a redundancy exercise. However, like a redundancy exercise, the employer should focus on which roles it does not currently need, and which can therefore be furloughed, rather than thinking of which people it wishes to furlough. These decisions should be operational and structural, not personal. And of course, the employer’s request for an employee to agree to go on furlough, and the employee’s consent, is effectively a mini-consultation exercise.
Those who are off sick because they are either ill or self-isolating may only be getting statutory sick pay (SSP). As this is approximately only £95 per week in most cases, it is unlikely to be as much as 80% of full pay. However, the 26 March guidelines are clear that you are not able to furlough someone who is off sick or self-isolating unless you also no longer require their job to be performed.
The one exception to this is those who are self-isolating at home because they are ‘shielding’ under the Government’s shielding advice for those who are at very high risk from COVID-19. For this small group, their employer is allowed to place them on furlough (with their agreement) even if their role still needs to be performed.
Can I impose furlough on someone who is unwilling to agree to it?
No. Placing someone on furlough requires their willing consent and an employer cannot force it on them.
In many cases, the employer will inform staff of the difficult financial situation that the organisation finds itself in and will hope that this is enough, along with the benefits that come with being paid while not having to work, for most employees to be willing to agree to go on furlough.
Where any employees are reluctant to agree, the leverage that an employer may have to persuade them will depend on the situation that the particular organisation finds itself in. If the employees’ contracts contain a power for the employer to temporarily lay them off without pay, a threat of lay-off as the alternative will normally be enough. But for the vast majority of employers, who do not have this option, there may well be far less leverage.
The obvious ‘threat’ is to make employees redundant, but this of course comes with an additional cost and may not be viable. Failing that, it may simply be a case of reminding the employees that the organisation may become insolvent if staff aren’t willing to co-operate.
There is no reason why an employer cannot promise to pay a post-furlough bonus of some type at some point in the future as an incentive to agreeing to be furloughed now (perhaps related in some way to the loss in pay that higher earners may suffer when on furlough).
Can we ask furloughed employees to do any work for us?
No. An employee is considered furloughed for the purpose of this scheme only if they do no work for the employer. The scheme therefore does not cover the wages of employees whose hours and pay are reduced but who keep on working at a reduced level.
While the earliest description of CJRS suggested that employees may still be able to perform some tasks for their employer if it was not something that produced any value for the business, the 26 March guidelines have changed tack, stating that “when on furlough an employee can not undertake work for, or on behalf of, the organisation. This includes providing services or generating revenue.” We believe that this is very clearly saying that a furloughed worker cannot do any work whatsoever for the employer. We do not believe that asking employees to “volunteer” to perform work for the employer will be acceptable.
Therefore if you wish to retain some staff to continue to do essential tasks such as maintaining site security, manning your phones or maintaining any equipment or IT systems, they cannot be furloughed. We would advise you not to take risks here by seeking to hide such work.
The rules do say that furloughed employees “can take part in volunteer work”. However, we do not interpret this as permitting employees to voluntarily do work for their employer. It seems likely that this is a reference to voluntary work outside of the employer’s organisation, such as volunteering with the Government’s NHS volunteering scheme.
Can we rotate employees on and off furlough leave?
This question may well come up during consultation and our advice is that it could be unreasonable not to consider whether this might be possible.
At present, there appears to be nothing to prevent employers taking employees on and off furlough leave – as long as each period of furlough leave is at least 3 weeks long. Some staff (particularly those with children at home) may welcome being furloughed even if it is on a reduced salary. Others will need to maintain their salary, if at all possible.
What situations will furlough leave not help with?
Furlough leave is to protect the jobs of employees who would have otherwise been laid off or made redundant due to the impact of coronavirus on the employer’s business. It does not help with any situations where employees had agreed to reduce their hours, or to take a pay cut but where they are still required to work in some capacity.
There is currently no option to combine reduced hours with furlough leave. In our experience, many businesses who still have a flow of work are looking at reduced hours/pay at this stage. Furlough leave may still need to be used further down the line.
Furlough also cannot be used for those who are self-isolating at home or staying home to look after children unless their employer also does not have any work for them to perform.
How will this affect the employment status of employees?
The employees concerned will remain on the employer’s payroll and will continue to accrue holiday and service as usual.
During the furlough leave, the employee’s employment contract remains in place in other respects, such as important terms covering confidentiality, intellectual property rights, not working for others without permission and restrictive covenants. You may wish to remind them of this.
Working for others during furlough
If a furloughed employee already works (with your permission) for another organisation in addition to yours, being furloughed by you does not prevent them from continuing to work for that other organisation – or even being furloughed by them too. It seems clear that the spirit of the CJRS is that HMRC would frown upon such an employee increasing their working hours for that second employer but this is not currently prohibited.
As the scheme is being administered by HMRC and employers have to give the names of the employees being ‘furloughed’, it is likely that any employee who takes new separate paid work during furlough leave will be identified (eventually!). Our guess is that HMRC might then reclaim payments made to the (first) employer. Therefore, it is important that your furloughed employees understand that they cannot undertake work elsewhere during the furlough period during the hours when they normally work for you.
What about annual leave?
We don’t have any clear answers on this topic yet!
Is the taking of annual leave during furlough leave possible or allowed? If you pay an employee for a day of holiday, might that render their furlough period void?
It feels like it would make sense, particularly if you are ‘topping’ up the salary of furloughed employees to 100%, to require employees on furlough to take their accrued annual leave during any furlough period. And with the Easter bank holidays coming up, what will happen then? For those employers who cannot afford to ‘top up’, can you insist on employees taking their accrued holiday during furlough if it is not at the proper rate of holiday pay laid down by law? Would you pay at 80% or at the employees’ full salary?
We don’t yet know the answers to any of these questions. It is a measure of the uncertainties here that within our team at Menzies Law we can find no consensus on what the ‘safer’ advice is to give you here! Is it to allow holiday to be taken, or to say it cannot? We just don’t know.
Since the Easter bank holidays are fast approaching, we are hoping for some Government guidance on this issue very soon.
What about an employee falling sick during furlough leave?
The CJRS rules are not yet clear about whether it is possible to take sick leave during furlough leave. It may be that once you are on furlough leave, sick leave is not possible.
If we are wrong about that, we anticipate that most employees would fail to notify their employer if they became sick (or need to self-isolate) during furlough leave because of the adverse pay consequences of doing so if it meant going onto SSP.
What about employees taking maternity leave or other types of family leave?
These ‘family friendly’ leaves are still available and for some people it will make sense for these to continue (particularly with the special protections that are available to employees taking these types of leave).
However, for an employee on maternity leave who is nearing the end of her leave and is currently in a period of nil pay, she may wish to ask to end her maternity leave and be furloughed instead. There doesn’t seem to be anything to prevent this happening, so long as the employer does not currently have any work for her to perform.
We are here to help
We are coming across new scenarios, new information and new questions regarding furlough leave every day. We are very happy to help guide you through what is undoubtedly becoming one of biggest challenges we have ever seen in employment law.
While the rules on CJRS are currently evolving on an almost daily basis, and some of the elements of it are subtly shifting, we are here to help you keep up to date.
If you found my first and second blogs on the IR35 reforms helpful, let me share with you contenders 7 to 10 in my ‘most irksome’ list.
But first, a quick update. You may be aware that the government promised a review of the off-payroll working rules (IR35). The HMRC have now announced that changes to the operation of therules will only apply topayments made for services provided on or after 6 April 2020.
Previously, the rules would have applied to any payments made on or after 6 April 2020, regardless of when the services were carried out. This means organisations will only need to determine whether the rules apply for contracts they plan to continue beyond 6 April 2020.
Wholescale change was always doubtful but this concession at least helps organisations better prepare.
Now, onto my irksome list…
Number 7 – really not helpful
Coming in at 7, I offer up the unhelpfulness of CEST, the HMRC online ‘Check Employment Status Tool’. CEST is there allegedly to help you and contractors work out a person’s employment status, but the reality is rather different.
Put simply, I think it’s a waste of time. CEST is a multiple choice test, and often none of the offered answers feel like the right answer. There are also a few trick questions.
Although HMRC says that it will stand by whatever answer CEST gives you (assuming you input the correct, true facts), my experience and that of many users is that usually the answer it gives is that it’s not sure and you will have to take advice. Also, HMRC says it won’t stand by the answer that CEST gives you if it feels that a contractor has put in place contrived arrangements designed to get an answer from CEST that confirms the engagement is outside IR35. Apparently, this would be treated as deliberate non-compliance and draw higher penalties. What on earth are contrived arrangements? How could we know that? To an extent, many things that businesses do are designed to minimise their tax liability. What will be acceptable and what will be seen as contrived? The jury is out on that, and it leaves things as clear as mud.
(Ironically, I’m told that the CEST questions were written by contractors hired by HMRC because they didn’t have the skills for that in-house.)
Number 8 – also not at all helpful
I’m not through with knocking CEST yet. This one gets its own ranking because of how much it annoys me.
CEST does not factor in one of the keystones of the employment law status test, namely what we lawyers call ‘mutuality of obligation’. In English, ‘mutuality of obligation’ in a worker’s contract means that they are obliged to turn up for work when they’re scheduled to do so and their ‘employer’ is then obliged to pay them. If this ‘mutuality’ exists, the law says this is a strong sign of the relationship being employment. If it’s missing, it points more towards self-employment.
This is a really fundamental part of the employment status legal test. Why on earth it’s not in the CEST programme, I really don’t understand. It could sometimes make all the difference.
Number 9 – also worrying
At number 9 we have the fact that, where you review a contractor and decide to move them over to become your employee, that opens up a considerable risk. The risk is that HMRC may not thank you for that move, but instead take the view that ‘employee’ may have been the true status of this person all along, and delve into their last 6 years. In other words, the change of status is an admission that this person should have been on your PAYE payroll all along.
I suspect that on many occasions HMRC may well have a point here!
However, I do have a suggested way to counter this risk effectively, and if you’d like to know more, just let me know.
Number 10 – final irksome point
At number 10 we have the fact that you may have innocently paid a contractor gross, but if HMRC want paying and arrears of tax, it’s you they will go after, even if it several years back.
The tax that the contractor may have paid HMRC can be credited in your favour if HMRC are willing to do so, but this at their discretion and it’s not a given.
You are the easy target, with deeper pockets than most consultants, and so it’s your head that’s on the block.
Can I help ease the pain?
The IR35 reforms are creating a lot of pain and hard slog for you hard-working HR professionals. Can help you?
I’m currently working with several clients to get them get ready for new rules in April. There’s lots that I can share with you in terms of practical tips, suggestions for how to play things, risk assessment etc. So if you’re facing the pain of the IR35 reforms and could do with some advice, support, a sounding board, a fresh pair of eyes or just some sympathy, do please get in touch with me.
2020 looks to be a busy year for employment law changes. We’ve created a time-table of major employment law changes you may want to consider to help you with your planning.
Case law developments anticipated in 2020
In addition to the list below, we’re expecting outcomes on some important legal cases this year. Keep your eyes peeled for the news on the following:
Morrisons data breach
This is a case with big potential implications for employers. Back in 2014 Morrisons Supermarket was the victim of a data breach carried out by an employee. He leaked personal details online of 100,000 employees – including their salary, bank account and NI information. He was jailed for this but Morrisons were found vicariously liable for his actions in the High Court and the Court of Appeal.
They are now appealing to the Supreme Court in an attempt to reverse this judgment, which is anticipated in 2020. This case has created a wider scope for vicarious liability which employers need to be aware of. We will of course keep you informed on the outcome of the Supreme Court judgment.
Mencap sleep-in pay appeal
This hearing (anticipated Feb 2020) and judgement from Supreme Court is urgently awaited by a variety of charities. This case revolves around the question of whether every hour of a sleep-in shift counts for the purposed of the National Minimum Wage – including the hours the individual spends asleep.
It has been reported that total back pay could be as much as £400 million. It is therefore a critical case for care charities and their finances. If the Supreme Court overrules the Court of Appeal’s ruling, some charities will face bankruptcy.
Employment Law Timetable 2020:
1. Brexit 31 January
Many UK employment laws in areas such as holidays and business transfers currently come from EU directives. Under the provisions of the EU Withdrawal Act these have been written into UK law. This means that on the day after the UK leaves the EU there will be no immediate change in the law affecting employment. However, what happens in the longer term will be for the UK government and Parliament to decide.
We are still very much in the land of the ‘unknown’ at this stage. Any changes will depend on how the UK leaves the EU, and the nature of our future relationship and trading arrangements.
We work in partnership with Business Immigration law experts to offer legal advice and fixed fee services in this specialist area. Please get in touch if you’d like to know more: 0117 325 0526
2. Gender Pay Gap reporting for public sector employers 30 March
Public Sector Organisations with 250+ employees will have to submit their 2019 reports before 30 March 2020.
3. National Minimum Wage 1 April
An increase in the National Minimum Wage is due in April 2020 as follows:
25 and over
21 to 24
18 to 20
4. Gender Pay Gap reporting for private sector employers 4 April
Companies with 250+ employees will have to submit their 2019 reports before 4 April 2020.
5. Statutory Sick Pay 6 April
SSP increase expected
6. A week’s pay 6 April
The maximum amount of a week’s pay (used to calculate statutory redundancy payments) expected to increase.
7. Termination Payments 6 April
Termination payments above £30,000 now to be subject to employer’s national insurance (Class 1A NICs)
8. IR35 Changes 6 April
The IR35 tax rules are aimed at reducing tax avoidance for off-payroll contractors working through personal service companies (PSC) come into force in April.
These are a set of new processes and obligations which will apply to existing as well as new arrangements. They require action each and every time.
From 6 April 2020, medium and large sized private sector businesses will become responsible for assessing the employment status of the off-payroll workers they engage. The simple reason behind this is cost. The government has reported that the cost, in terms of lost tax revenue, of non-compliance with the off-payroll working rules in the private sector is growing and will reach £1.3 billion a year by 2023/24.
From April the new rules will apply to private sector businesses with an annual turnover of over £10.2 million or 50 or more employees.
The Government has, however, announced a ‘limited’ Off-payroll review. The likely outcome is small tweaks rather than the wholescale change some campaigners would have liked. Accordingly we wouldn’t advise you to change your plans at this stage, you need to be ready for this one.
9. Right to a Written Statement 6 April
There are three important changes to written statements, which will apply from April 6th 2020:
All workers employed on or after 6th April 2020 will be entitled to a written statement of employment particulars.
Employees and workers must be provided with their written statement on or before their first day of employment.
There is additional information that written statements will need to contain
As this is one of the biggest employment law changes of 2020 (if not the biggest), you can find our much more detailed piece here:
From 6th April 2020, there will be a reduction in the percentage of employees required to make a valid request for an agreement on the sharing of information and consultation within the workplace. Currently it is at least 10% of the workforce who must put in a request before an employer is obliged to take steps to comply with this right. This percentage will be reduced to 2%. The requirement that at least 15 employees make the request will remain.
11. Agency Workers 6 April
There are three important changes to agency workers’ rights which will apply from April 6th 2020:
Abolition of the Swedish Derogation (sometimes referred to as ‘pay between assignments’ contracts). Previously agency workers could agree a contract which would remove their right to equal pay with permanent counterparts after 12 weeks working at the same assignment. From 6th April 2020, these contracts will no longer be permissible, and all agency workers, after 12 weeks, will be entitled to the same rate of pay as their permanent counterparts.
All agency workers will be entitled to a key information document that more clearly sets out their employment relationships and terms and conditions with their agency.
Agency workers who are considered to be employees will be protected from unfair dismissal or suffering a detriment if the reasons are related to asserting rights associated with The Agency Worker Regulations.
12. Holiday Pay 6 April
From 6th April 2020, the reference period used to calculate a ‘week’s pay’ for holiday pay purposes will be extended from the previous 12 weeks of work to the previous 52 weeks.
13. New Statutory Rates 7 April
Statutory Maternity Pay (SMP), Statutory Paternity Pay (SPP), Shared Parental Pay (ShPP) and Statutory Adoption Pay (SAP) expected to increase.
14. Parental Bereavement leave April
It will give all employed parents the right to 2 weeks’ leave if they lose a child under the age of 18, or suffer a stillbirth from 24 weeks of pregnancy. Parents will also be able to claim pay for this period, subject to meeting eligibility criteria.
15. Posted Workers 30 July
Revised Posted Workers Directive set to be become law.
16. Free Movement 31 December
Free movement of EU workers expected to end.
As always, Menzies Law will keep you up to date with any employment law developments and their implications as they happen. In the meantime, if there is anything you’d like advice or guidance on, we’d be keen to explore how we can help you, just get in touch! 0117 325 0526
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The recent ousting of McDonald’s CEO for having a workplace relationship provides a useful chance to look at the issue of office romances and ask ourselves – what is appropriate for businesses nowadays?
The US approach
I worked in the City of London in the early noughties. There was a lot of eye rolling amongst my employment law colleagues at our American-owned clients who had so-called ‘love contracts’. In essence these prohibited romantic relationships with colleagues – which presumably was in the McDonald’s contract. What nonsense, we said to each other.
Thinking about it now, most of us were (or had been) in relationships with people we met through work. Like doctors and other busy working types who have little life outside of work, the only people young lawyers usually get the chance to meet are work colleagues. If you can’t date them then what on earth are you going to do for romance?
Large US-owned businesses have continued to pursue a trend of banning workplace relationships and this has now spread to other large organisations – although sometimes only at management levels. Some bans are not a blanket policy across the entire business, but instead only prohibit relationships within departments or where there is a significant power imbalance by virtue of seniority.
Decide what is reasonable for your organisation
I expect you’ll agree that the more targeted such a ban is towards the precise areas of ER/legal risk that you and I have to deal with when an office relationship goes wrong, the (potentially) more reasonable such a ban may feel.
It may feel over the top to prevent you from dating someone who works in another division or department of the company, but more reasonable if it were within the same team, and certainly very much more reasonable where one of you was involved in the line management of the other.
What are the legal risks?
In terms of what the risks are, there is of course the obvious legal risk of one party deciding (sooner or later) that the other party’s attention is unwanted. This may be right from the outset, or after one or two dates, or after a much longer relationship. Whatever the duration of the relationship, once it goes wrong and two individuals have to keep working together, the risk of a claim related to harassment (or similar) arises. There is also the potential that you may have to end up moving or exiting one party.
Even without thinking about the legal implications, there is of course the problem of all the disruption (gossip, rumours, flirting, tears and general distraction from one’s duties) that office relationships, good and bad, can cause. Time spent fluttering your eyelashes or gazing longingly at a colleague for hours are hardly helping you crack on in a productive way with your work (so I’m told).
From my perspective as an employment lawyer who mostly defends employers, my experience is that many sexual harassment claims could certainly be avoided if it were a clear rule that there was to be no fraternization in the workplace.
It brings to mind the advice I had to give on a situation where a male CEO was systematically (and intentionally) sleeping his way through all of the several female directors on their Board. You will be pleased to hear that it stopped when the CEO failed to ‘succeed’ with the HR Director. She spotted the pattern and called his behaviour out. The point is, of course, that his sexual urges would hopefully have been restrained (or at least reduced) if he had been aware that he would be in breach of contract by such action. Not a guaranteed outcome, but at least a strong deterrent.
What’s the solution?
My experienced view is that there is real benefit to employers in having – as standard – a contractual ban on any workplace romance where one party is involved in the line management of the other or where there is a significant power imbalance (however that might be measured in the organisation).
The downside of such an approach is that some office romances and relationships would fail to materialise. The advantages however are considerable.
If you’d like to talk about putting such a policy in place in your organisation, or discuss anything else I’ve mentioned, do get in touch with me at .
If you found my first blog on the IR35 reforms helpful, let me share with you contenders 4, 5 and 6 in my ‘most irksome’ list.
Number 4 most irksome
At number 4 is the fact that when assessing the IR35 question for any contractor you have to work out the ‘hypothetical’ contract that could be said to exist between the consultant, their PSC and your own business. That involves reviewing the terms of your contact with the consultant’s PSC and also the PSC’s contract with the consultant. If the latter does not exist (which is often the case) then you have to interview the consultant to find out what the deal is between him or her and their PSC.
As a starting point, they may have little clue what you are on about! I’m not sure how many contractors with a PSC really appreciate what the set-up is and what their relationship is with their PSC. Are they just a shareholder and director or are they an employee too? Are they paid just in share dividends or in salary too? What about pension and any other benefits?
Only after you have all this information can you put it together with the terms of the agreement between your business and the PSC and form an overview of the whole picture to help you answer the main question, which is ‘Would this contractor really be our employee, but for the existence of their PSC?’
Number 5 – devilishly complicated
At number 5 is the fact that your assessment of what the terms of this ‘hypothetical’ contract may be will become a really complicated exercise if, as is sometimes the case, there may be an agency sitting in the contractual chain between your business and the PSC. (In fact, sometimes there are even more businesses in the chain.)
If this is the case you then need to assess your contract with the agency, the agency’s contract with the the PSC and also the PSC’s contract with the consultant. All of them need to be brought together to ascertain the overall situation. This is where it can get very complicated indeed.
Number 6 – very unhelpful
At number 6 I will offer up the fact that if you find that your business’s contract with the PSC has any of the following terms in it, then the contractor is almost guaranteed to be seen in law as your employee:
needing to ask your permission before taking holiday
needing to comply with any absence management policy (beyond the mere fact of telling you they are sick)
any form of pension payment
any form of private healthcare provision or other insurance cover
(You may think it’s obvious that these sorts of terms shouldn’t be present in a self-employed contractor agreement, but you’d be amazed at what we’ve seen over the years…)
The remaining top 10…
If you can bear any more, I will share the remainder of my top 10 in a future blog. I’m confident you can’t wait.
If you’re facing the pain of the IR35 reforms and could do with some advice, support, a sounding board, a fresh pair of eyes or simply a hug, do please get in touch with me.
What are the 10 most irksome things about the forthcoming IR35 reforms? When it comes to preparing for the IR35 reforms in the private and charity sectors next April, the prize for the greatest hassle has several contenders. Allow me to introduce you to 10 of them over this and a few further blogs.
I know it probably seems really, really boring, but it’s important to be ready. What we learned from the roll-out of the same rules in the public sector is that there is no way you can wait until March 2020 before you do anything. You need to be preparing now!
Number 1 most irksome
I think no. 1 has got to be that every single contractor will need to have their particular personal circumstances assessed individually by their employer. They will need to be closely interviewed and the terms of their contractual relationship and the factual situation of their work analysed.
If you have several contractors working for you, this could take some time. (In fact, are you absolutely sure precisely how many contractors you have?)
When assessing each contractor, their ‘employer’ (end user) will need to consider the particular personal circumstances of the contractor, such as what they are doing for the business, what other work they may be doing in addition, what the terms are of their PSC’s contract with the end user, how much control they operate under, how they do their work, where they do their work, how they charge for it, etc. etc.
You could have two apparently identical contractors, but one may have special personal circumstances that you don’t even yet know about that could make all the difference as to whether they do or don’t comply with IR35. All the responsibility to find this out and assess it will be on the end user.
Number 2 most irksome
No. 2 pain in the backside is probably that previous approval by HMRC for someone being compliant with IR35 is irrelevant to the new duty to assess them again. It would be so nice if previous approval could be relied upon – why on earth not?
The short answer is probably that IR35, which was originally introduced in 2000, has generally been a massive failure, and so the intention is to go back to square one with every contractor once their end user clients take responsibility for being the IR35 police officer/tax collector.
Number 3 still really irksome
For no. 3 I’m going to offer up the fact that every employer/end user is going to need to set up an IR35 appeals process. Each contractor who is assessed as not being compliant with IR35 and therefore must have tax and NI deducted at source from their fees will have the right to appeal against that to the end user. My guess is that most contractors who are faced with the pain of extra tax are going to have a pop at an appeal.
You are likely to receive long, complex letters from the contractors’ tax advisers, accountants and solicitors. The contractors themselves may be really passionate about arguing legal interpretations. Which of your lucky senior managers is going to draw the short straw and hear these appeals? (Try to ensure you’re away on holiday that week/month/year.)
The remaining top 10…
If you can bear any more, I will share the rest of my top 10 in future blogs. Who said tax couldn’t be fun?
If you’re facing the pain of the IR35 reforms and could do with some advice, support, a sounding board, a fresh pair of eyes or simply a hug, do please get in touch with me .
In part 1 of our blog, Tamsin James looked at Gross Misconduct from the perspective of the employee. Here in part 2, Luke Menzies responds from the employer’s viewpoint and provides useful guidance on how to avoid a costly unfair dismissal claim.
Luke Menzies: Gross misconduct from an employer’s perspective
Rather like a Supreme Court judge, I can say that I’ve had the luxury of reading Tamsin’s fine article before writing my own, and I agree with her! I too have been involved in advising on ‘too many to count’ gross misconducts during my career, and here are some of the things that I’ve learnt along the way.
1. If, as an employer, you want to make employees realise how important it is to follow a rule – make sure it is written down. It is certainly correct that ‘gross misconduct’ lists in staff handbooks are examples only. However, if you have some very clear rules (e.g. as a manufacturing employee you must wash down equipment and yourself after work), then make sure it is clearly stated somewhere.
2. Just because you have acted one way in the past, it doesn’t mean you have to exactly follow that path again. Whilst consistency is a benchmark in employment law cases, there is always room to accommodate the fact that we are human beings. Using Tamsin’s example, someone could be guilty of gross misconduct for shouting obscenities at their supervisor. However, a long-serving employee who happens to be going through a very difficult bereavement could still be guilty of gross misconduct but given a final written warning due to the unusual mitigating circumstances. This does not create a ‘precedent’ that shouting obscenities will from now on only lead to a written warning: the written warning was an exception to the general rule.
3.Keep an open mind during investigations. Too often, I see investigations whose only purpose seems to be prove the misconduct, rather than a genuine fact-finding exploration. Closed or ‘cross examination’ style questions to the witnesses are the big give-away here.
4. Very few employers relish sacking an employee for gross misconduct.It is extremely unpleasant all round. That being said, I have known employers who just want to get rid of someone, trying to come up with a case that will stick. Expenses claims and computer searches are ripe territory to find examples of gross misconduct, apparently.
5. Following on from no. 4, don’t jump on any misconduct just because you are trying to dismiss someone. I field lots of calls from employers believing they have ‘got’ someone – only for me to advise that I don’t see a case of gross misconduct being made out. If you really want someone to leave your organisation – how about having a grown up chat or a protected conversation instead?
6.Make sure your employee is aware of the evidence against him or her. You do not necessarily have to hand over everything you have gathered, particularly if it is very sensitive or confidentiality is an issue. However, if you make your findings on information you have seen but your employee hasn’t, there is a clear path to a finding of unfair dismissal.
7.The ACAS Code of Practice on Disciplinary and Grievance Procedures is a useful document – but it is not an instruction manual. It is absolutely right to be mindful of the ACAS Code as failure to adhere to it can see an uplift in compensation. It does provide for flexibility, though. If it is fair and reasonable to follow a particular route, make sure you let the employee know why you are doing it.
8.Be prepared to be flexible during hearings. I have seen cases lost where an employer has refused a short adjournment to an employee. We know that there are some cases where it is felt that the employee is using every delaying tactic going, but being as flexible as you can be will help if you end up defending an Employment Tribunal claim. Maintain the moral high ground and ‘play the parent’ all the way through, even if you feel the employee is childishly playing every trick in the book.
9. It is possible to short-circuit your processes if the employee has less than two years’ service. But again, be mindful of this. Yes, they cannot bring a claim for unfair dismissal due to lack of service. But do you want to have a two-tier organisation where only those with sufficient service get a ‘fair hearing’? Might your approach confuse line managers? Also, without due process you might wish the other ‘day one’ claims that might be lurking – discrimination, whistleblowing, health and safety detriment. A good compromise is to use a shortened or cut-down process for those with less than 2 years’ service, so that you are still following a basic process but less burdensome than the full version.
10.Do not use ‘breakdown in trust and confidence’ as the reason for dismissal. Employment Tribunals have wised up to employers who use this catch-all phrase to justify a misconduct dismissal (gross misconduct or otherwise) and nowadays Tribunals really hate it. Yes, you may no longer trust or have confidence in your employee because they messed up a sales pitch, but again (and back to point 5) how about a grown-up chat or protected conversation instead? If it was misconduct, then the dismissal should be a misconduct dismissal. Likewise, if it was for poor performance, it is a capability dismissal. (Leave the ‘trust and confidence’ argument for employees who are bringing a constructive dismissal claim…)
Gross misconduct isn’t something businesses or HR plan for but they do need to be ready for it and, wherever possible, limit the prospects of it happening in the first place. The purpose of employee contracts, staff handbooks and policies are to lay down the expectations and ground rules in terms of employee behaviour. If you need advice on managing gross misconduct in your workplace or would benefit from a review and ‘tightening up’ of your employment contracts, we’d be happy to help you.