In these challenging times, our teams have been receiving a high volume of queries from clients and businesses about the impact of Covid-19 on their operations on key issues such as furloughing, contracts and supply chain management.

To help you and your business, the team has collated the most frequently asked questions from this week, with their responses, in the hope that this information is useful to you. Each week these questions will be updated, but if you have any queries, at any time, please talk to the team for more detailed advice that is specific to you and your business.

Can furloughed employees take annual leave?

Yes they can but is not clear whether this will have an impact on any subsequent furlough payment from HMRC. Furlough is a form of lay-off and the contract of employment continues as normal during that lay-off. This means that employees can request to take annual leave or be required by the employer to take annual leave subject to the correct period of notice being given. Employers will need to be mindful of these issues.

Firstly, it may be that HMRC decides that a period of annual leave breaks the period of furlough if it falls part-way through the 3 week stretch required in order for an employee to be furloughed. This would obviously affect HMRC grants. Secondly, employers are likely to be liable for the difference between furlough pay from HMRC and the employee’s normal rate of holiday pay or possibly even all of the holiday pay. Thirdly, the purpose of annual leave is for workers to take leave from their employment. That may not be entirely consistent with taking leave whilst being laid off. If employers attempt to force employees to take annual leave, they may be faced with industrial relations issues. Until further guidance is issued, employers are advised to proceed with caution.

Is it reasonable to just make employees redundant now even though they are eligible to be put on furlough?

Arguably not. Employees with more than 2 years’ service have the right not to be unfairly dismissed. When carrying out redundancies an employer is required to consult with the potentially redundant employee and consider whether there are ways to mitigate the consequences of redundancy. Placing employees on furlough will obviously mitigate the financial consequences in that it provides the employee with an extended income stream and also provides the employer with breathing space to consider whether the redundancy is still necessary once the business is up and running again. Therefore proceeding directly to redundancy dismissal without properly considering whether to put the employee on furlough may render that dismissal unfair.

Can I dismiss employees who refuse to come into work because they are worried that they may contract the virus?

Potentially this is unauthorised absence. Certainly the employee is not eligible for SSP as they are not self-isolating. Arguably it is not appropriate to furlough them either as there is clearly work available for them to do.

Disciplining such employees is, however difficult.  Firstly because of the practical difficulties of holding a disciplinary meeting at the moment but also due to the provisions of section 100 of the Employment Rights Act 1996. This states that an employee is automatically unfairly dismissed if the principal reason for dismissal is that in circumstances of danger which the employee reasonably believed  to be serious and imminent he took steps to protect himself from danger. This provision applies regardless of length  of service.

The key to protecting against such claims is to show that there can be no reasonable belief on the part of the employee. If therefore employers put effective measures in place to protect employees in the workforce and these are properly explained to employees then this makes it much harder for employees to rely on s.100 in the event that they are dismissed for refusing to attend work. However dismissing employees in the current climate is a hazardous course and detailed advice needs to be taken beforehand.

Can we vary our contracts to manage the current disruption?

If all parties agree then contracts can be varied. You should always check the existing contract however to ensure that the variation is done correctly and is properly incorporated. Often contracts will state that any variations should be in writing. Even if the contract does not note this however we would always strongly advise that all agreed variations be in writing to avoid ambiguity and also dispute in the future as to what or wasn’t agreed.  This can often be done simply and cheaply by putting in place a letter style agreement which might supplement the existing contract by setting out new terms.

If you have signed and have in place a binding contract one party cannot unilaterally impose on the other new terms. This means that you cannot impose new terms without agreement.

What will happen if our customer’s customer does not pay?

If you are a supplier of goods and part of a supply chain a situation may arise in which you will deliver goods to one party who is going to sell them on to their customer. The goods may even have been requested from you in the knowledge that they were intended for the customer of your customer. If the end customer does not pay their supplier (your customer) does this then mean that you will not get paid by your customer? In short, if you have a binding contract with your customer that simply states that you will supply to them and they will pay you for the goods it is irrelevant what they intend to do with those goods and whether they get paid by their customer or not. They will have a binding contractual commitment with you to pay for the goods (and the contract will normally note this under a price and payment heading). If they do not pay in these circumstances then you will have a clear breach of contract action against them.

There are some exceptions to this if different contractual terms are noted but this would be unusual and would have required bespoke provisions of the contract having been agreed between the parties when the contract was entered into.

Our team is on hand to help you, your business and your family however we can, so please get in touch with us on 01482 325242 or email enquiries@andrewjackson.co.uk

Correct as of 5pm on 03.04.2020