What just happened?
There are suggestions that the UK’s Chancellor will not seek to extend the furlough scheme beyond the October deadline, something that the Bank of England governor supports[1].
What does this mean?
As October draws near there is renewed interest in whether the furlough scheme will be extended. With so many employers and workers in the UK relying on the scheme to get them through the pandemic, there are fears that the end of the scheme will result in mass unemployment.
The National Institute of Economic and Social Research predict that the end of the scheme will see 3 million people unemployed. Indeed, current trends suggest that as Government support withdraws, employers are showing less willingness to retain their employees. Since the introduction of employer contributions and an end to the acceptance of new referrals to the scheme in July, there have been mass layoffs.[2]
We have already seen that businesses big and small have been hard hit by the pandemic but following the end of the scheme it will be small business owners who will suffer the biggest impact[3]. For small business owners and their employees, the scheme has been a lifeline with fewer cash reserves to help them through the pandemic and the months of lockdown in the first place. They will struggle to complete with the larger companies whom patrons have flocked to following the easing of lockdown offering a much-needed injection of cash. Should small businesses need to close following the end of the scheme unlike those established businesses there is not the option to enter administration with a high chance of being bought and sold by another well known brand.
How does it impact the legal sector?
As admissions and acceptance of redundancies following the scheme’s end are seemingly inevitable, employers must be cautious to manoeuvre the legal challenges that this may bring. Redundancies may be necessary because the pandemic has forced businesses to adapt or change their operations, they are changing premises or closing the business altogether. Therefore, employers must ensure that they adhere to the collective redundancy consultation procedures which impose requirements on business owners who chose to make more than 20 of their employees redundant at any one time.
Where employers do need to make employees redundant during furlough or upon the schemes’ completion, they must pay careful attention to existing employment legislation which determines that employees may not be unfairly dismissed[4] and attempt to avoid and limit such claims. As such, where employers consider which pool of employees to make redundant, they must not limit their considerations simply to those already furloughed but also include those still working. Inclusive in reasons for unfair dismissal are dismissal following applications for maternity, paternity and adoption leave and requests for flexible working[5]. Such requests are common, and employers must ensure that those employees they select for redundancy are based upon considerations as to interchangeable skills and merit. That is not to say that they cannot make those who have made such requests redundant, this just cannot be the reason for their redundancy.
Of equal importance is to ensure that those selected as at risk of redundancy are not inadvertently placing the company at risk of claims of unlawful discrimination such as sex, race or disability discrimination. Employers cannot use the schemes end to impose unjust or discriminatory redundancies and, must ensure that they pay heed to the normal laws that govern employment.
In contrast, it is not the case that all those whom are furloughed will be made redundant, there will be a volume of employees returning to work after the furlough scheme ends. Although, they will not be returning to the norm or to work as it was once known. There will be a new norm that both employers and employees must prepare for with restrictions on the number of employees in the workplace, social distancing may cause complications should the employer need to impose a variation on their employee contracts. As employers are not permitted to unilaterally impose changes to an employee’s contract, should the terms and conditions need amendment to fit the new normal this must be a discussion with the employees. There is also consideration that the employee’s circumstances have changes such as the need to self-isolate.
As the purpose of the scheme was to reduce the impact of unemployment and encourage those to spend as they still earnt money. The fear is that following the end of the scheme there will be nothing in place to protect businesses and their workers, indeed, the Bank of England Governor has admitted that redundancies are inevitable and whilst this may be true, mass unemployment is not.
Written by Gabriella Cinotti
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References:
[1] George Parker and Delphine Strauss, Pressure grows on Rishi Sunnak to extend UK Furlough Scheme (Financial Times, August 7th2020)
[2] Katherine Dunn, The UK has an ambitious plan to prevent mass layoffs. What’s with the latest firing spree then? (Fortune, July 2nd 2020)
[3] Daniel Thomas, ‘Calm before the storm’: UK Small businesses fear for their future (Financial Times, July 30th 2020)
[4] Employment Rights Act 1996 Part X (chapter 1) (94) (1)
[5] https://www.gov.uk/dismissal/unfair-and-constructive-dismissal
Disclaimer: This article (and any information accessed through links in this article) is provided for information purposes only and does not constitute legal advice.