COVID-19 – A taste of the tricky issues facing employers

The Government’s updated guidance on the Coronavirus Job Retention Scheme (“CJRS”) only goes so far. In order to role out furlough leave quickly, employers are having to make their own determination on many issues not covered by the guidance. From our experience in assisting clients through the pandemic, we have identified a number of particularly tricky areas facing employers. To ensure some of these issues are on your radar, we have set these out below and are at hand to offer advice and help you navigate these challenging times.

1. Other paid work

The guidance states that furloughed employees cannot undertake any work on behalf of their employer but they are permitted to work for another employer, provided they are contractually allowed. It is unlikely that a contract of employment would allow a furloughed employee to undertake other work which conflicted with their existing role, however, if other work can be undertaken, what is an employer’s obligation if their employee contracts COVID-19 whilst working elsewhere?  Furthermore, what happens if/when an employer needs their workforce back but they are undertaking roles elsewhere? 

2. Sick pay

The guidance states that an employee who is already receiving statutory sick pay cannot be furloughed until he or she returns to work. However, what happens to an employee on furlough leave who gets sick?  Should that employee receive statutory sick pay, enhanced company sick pay or their furlough salary?  What can an employer reclaim under the CJRS for any period of sickness?

3. Employee share schemes

What is the impact of furlough leave on the tax treatment of company shares held by furloughed employees?  Will furloughed employees lose their entitlement to tax free rights? 

4. TUPE transfer 

Employees who have transferred to a new employer as a result of the TUPE Regulations (or who are due to over the next two months) will not have been on their new employer’s payroll as at 28 February 2020, do these transferred employees qualify for furlough leave?

5. Annual leave

ACAS guidance states that employers should still be encouraging employees to take their annual leave. Can employers therefore require furloughed employees to take annual leave without interrupting their furlough leave? What should employees be paid for annual leave taken during furlough leave?  Who is entitled to carry annual leave over into following holiday years?

6. Directors duties 

Furloughed directors are permitted to fulfil their statutory duties, however, what are these statutory duties?

7. Benefits

Should benefits be maintained for furloughed employees or can an employer and employee agree otherwise?  What is the impact of a reduction of salary for the purpose of furlough leave on permanent health insurance or death-in-service benefits?  

8. Non-coronavirus related redundancies 

If an employer had planned a redundancy exercise for reasons other than coronavirus, can the affected employees be made redundant or should they now be furloughed? Will this be a determining factor in considering the fairness of a dismissal? Should the redundancy exercise be put on hold and re-visited after furlough leave? 

Please do get in touch with Kate Brearley, Paul Reeves or Natalie Edwards or your usual Stephenson Harwood contact if you require advice on the issues arising out of this e-alert.

In the meantime, we hope you continue to keep safe and healthy during this challenging time.