Responding to employment challenges posed by coronavirus

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4 min read

The escalating Government response to control the spread of coronavirus has left most businesses with enormous challenges. What legal tools are available to make the necessary adjustments to the way their workforce is deployed?

Furloughing staff

If there is no work at all to do for certain categories of employees, most private sector employers are currently taking advantage of the Coronavirus Job Retention Scheme, which will provide funding for 80% of normal wage costs (up to a cap of £2,500 a month) for staff who have no work to do (see our separate briefing here for more details).  This is currently scheduled to run until the end of June, but an extension is possible.

Where employers are not topping up pay to 100%, the furloughing arrangements will normally involve a variation to employees’ terms and conditions for which consent will be required (see more on this below).  However, in cases where the contract of employment already entitles the employer to lay off without pay, such consent may not be necessary, although it will be desirable to obtain it where possible, to comply with Scheme guidance.

Short time working

As an alternative to furloughing staff, you may want to consider providing some of your employees with reduced work and reduced pay, on a temporary basis whilst retaining them as employees.  This is only possible where there is an express term or implied term (by custom) in your employees’ contracts allowing for this.

If there is no term allowing for this, this can be done with the employee’s agreement, or without agreement but acting in breach of contract (at risk of claims for constructive unfair dismissal, unlawful deduction of wages or damages for breach of contract).  It could also trigger collective consultation if this was imposed on 20 or more employees at the same establishment.

Variation of terms

Another option to consider is consulting with employees/trade unions to agree a temporary reduction of pay, hours or benefits (including to enhanced sick pay), or to agree short time working arrangements where not contractually entitled. Variation of terms may also be necessary when seeking to re-deploy staff where they are needed most.

More creatively, you could seek to agree more home working if this could help reduce overheads in terms of office space.

Whilst employees might not usually agree many of the potential changes mentioned, they may do in the current exceptional circumstances and as an alternative to redundancy. Employers may also find that some employees are open to variations which help address any concerns they have about resuming previous working arrangements given the need to maintain social distancing beyond the lockdown. Testing interest may be a practical first step before jumping to redundancy consultation.

This option could require collective consultation (if affecting 20 or more employees in any one establishment) of either 30-45 days (depending on the numbers affected), which would practically be difficult given the prohibition on mass meetings and where staff are unable to work from home.  Some creative solutions may be required to ensure compliance at least with the substance of the legislation, and, in exceptional circumstances, it may be possible to rely on the “special circumstances” defence in relation to at least some of the detailed formal requirements.

Notice requiring employees to take statutory annual leave

You are entitled to require your employees to take their annual leave on specified dates (unless your employees’ contracts of employment restrict you from doing this).  This option would need to be handled carefully, transparently and on an equal basis to avoid discrimination or breach of trust and confidence. There are likely to be additional issues to address if you are considering directing staff to take holiday while they are on furlough.

Asking for volunteers for unpaid leave or redundancy

You could ask for volunteers to take voluntary unpaid leave or redundancy.  This would need to be offered transparently, on an equal basis and without undue pressure to avoid discrimination or breach of contract.  This may also result in the loss of key staff and extra cost if there is an attractive enhanced redundancy scheme in place.

Redundancy consultation

The usual rules regarding process apply (including collective consultation obligations, as above), and you would need to consider how to conduct this remotely.  Further, the cost of making staff redundant will mean the cost savings are only achieved in the longer term.  You will also have lost staff who may be needed once the crisis passes.

Reducing non-employee headcount

Employers could explore options for terminating arrangements for indirect labour such as agency workers/contractors where there is no risk of an unfair dismissal or redundancy claim (since they are not employees).  However be aware that discrimination claims from such workers remain possible.

Securing Government assistance

A package of assistance for affected business has been developed (see the Government’s coronavirus support finder for more information).

Employers would be expected take the availability of these measures into account when considering steps to impose variations to contractual terms or declaring redundancies, as well as the availability of the Coronavirus Job Retention Scheme.

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