Furlough | Do you need employees’ consent?
The information in this blog is correct as at 28 April 2020. For the most up-to-date Employment Law and Health & Safety advice to support your organisation through the COVID-19 pandemic, visit our Coronavirus Advice Hub, which is updated daily and contains a variety of free guidance notes, letter templates, checklists, risk assessments and more.
The Job Retention Scheme offers a lifeline to employers whose businesses have been impacted by COVID-19 – but do employees need to agree to be furloughed before you can make a valid claim?
As we’ve come to expect from the confusing and often conflicting furlough guidance, there is some discrepancy around this point.
The first four versions of the guidance simply stated that in order to be eligible for the grant, the employer must write to the employee confirming that they have been furloughed. These earlier versions made no mention of needing to obtain the employee’s consent before applying to the scheme, and there was certainly nothing to state that there must be a written agreement in place.
However, the Treasury Direction issued on 15 April goes further, stating that businesses can only reclaim 80% of an employee’s salary if:
“…the employer and employee have agreed in writing (which may be in an electronic form such as an email) that the employee will cease all work in relation to their employment”.
Clearly, this requires more than just notification – it calls for the employee’s explicit written consent to furlough, which cannot be presumed by the employer. In addition, the Direction states that evidence of the agreement must be kept on file for five years, as HMRC may ask the employer to produce it in any subsequent audit of the scheme.
Ultimately, because the Direction gives the scheme its legislative footing, it trumps what is stated in the guidance.
So, what’s the problem?
If this was the only inconsistency, employers might not be quite so confused about whether they need an employee’s consent to put them on furlough. However, issues remain.
Confusingly, the sixth and most recent version of the guidance, which was published after the Direction, still suggests that HMRC will not seek evidence that the employee has agreed to temporarily cease all work. As the guidance is intended to help employers understand how HMRC will interpret and apply the Direction, employers could choose to rely on this and push ahead with furlough without obtaining written consent.
However, employers may be understandably reluctant to take this approach given what’s contained in the Direction.
So, do you need an employee’s consent to furlough?
Well, based on the experiences of those who have submitted a claim through the online application portal so far, it seems that HMRC is accepting claims without requiring evidence of the employee’s written agreement.
Employment Lawyer Daniel Barnett, curator of a well-known employment law bulletin service, sought confirmation on the matter from HMRC. His bulletin on this issue said that HMRC had clarified the situation and will treat applications for reimbursement under the scheme in accordance with the guidance. He attached the response from HMRC, which states:
“…the employer and the employee must reach an agreement and an auditable written record of this agreement must be retained. It does not necessarily follow that the employee will have provided written confirmation that such an agreement was reached in all cases.”
We are not sure this clarification is anything of the sort. Indeed, it is less unequivocal than the guidance on the GOV.UK website, which says:
“To be eligible for the grant employers must confirm in writing to their employee confirming that they have been furloughed…There needs to be a written record, but the employee does not have to provide a written response. A record of this communication must be kept for five years.”
Whilst confirmation from HMRC that they will judge claims based on the GOV.UK guidance is reassuring – especially for larger employers who would have a mammoth task obtaining and collating agreement from hundreds of employees – there is no doubt that questions remain. It also highlights the wider issue of a lack of clarity surrounding the scheme, as despite HMRC insisting that the guidance “is consistent with the Direction” here, it’s not difficult to see why many are confused. With contradictions still apparent, the issue of whether to rely on the guidance, as HMRC has advocated, or follow the Direction, which holds more legal weight, remains.
Practical, professional advice
Despite some clarification, furlough continues to create issues for many employers, not least due to the various inconsistencies in the guidance. For clear, concise advice from our Employment Law specialists based on the latest information, visit our free Coronavirus Advice Hub.