As the Furlough scheme reaches its first anniversary, Michal Stein of Boddy Matthews has successfully defended a claim brought by an ex-employee against one of its construction contractor clients. While the facts of the claim are straightforward and, likely, not unusual, the legal points at issue are of utmost importance and likely to affect many employers, facing redundancy situations despite the Coronavirus Job Retention Scheme.
As a result of the Covid-19 pandemic and lockdown, the employer client placed some of its workforce on Furlough, paying employees 80% of their contractual pay subject to the Scheme’s £2,500 monthly salary cap. When redundancies had to be made, the employer paid employees’ notice pay at the furlough rate. The contractual rate of pay was paid only for the part of the notice period which fell on or after 31 July 2020, when the Employment Rights Act 1996 (Coronavirus, Calculation of a Week’s Pay) Regulations 2020 (“the 2020 Regulations”) came into force. The 2020 Regulations required furlough notice pay to be at the pre-furlough rate.
Based on Boddy Matthews’ legal advice, our Construction contractor client took the view that:
- up until the introduction of the 2020 Regulations, the statutory provisions on notice pay (under the Employment Rights Act 1996) entitled it to pay statutory notice pay at the furlough rate;
- the contractual principles governing the furlough agreement allowed it to pay employees the furlough rate of pay for the duration of their notice period; and
- the 2020 Regulations changed the legal position as it understood it to be, were not retrospective, and only apply to notice periods from 31 July 2020.
The client sought to reassure its workforce of the legality of its actions, setting out the legal position in clear communication.
Nonetheless, possibly due to the complexity of the law at play, and the considerable media discussion (and misinformation) on this issue, the client faced an employment tribunal claim from one of its ex-employees. That individual believed he was entitled to his pre-furlough rate of pay for the duration of his notice period and the matter came before the Employment Tribunal in a virtual hearing.
Michal Stein represented our client before the Tribunal, which accepted our client’s position in full, dismissing all elements of the claim.
As far as we know, this is the first time the Employment Tribunal has dealt with the question of the rate of furlough notice pay. And, while employment tribunals are not bound by this decision, it is likely to be of considerable value to other employers faced with similar complaints.
For more information, please speak to Michal Stein or Helen Boddy.