Return to work after furlough – check employment contracts now

With the government now actively considering how the country can return to work, this is an excellent time to think about the impact on your business, in particular your employment terms. This is especially so if you have furloughed any part of your workforce. It’s also a great time to get a key part of your backyard tidied up in readiness for the opportunities that lie ahead.

The furlough scheme is unprecedented and is unlikely to be catered for in typical employment contracts. Both the laying off and the eventual return to work are activities that are unlikely to be fully covered by existing clauses. Whilst most people will not be looking at their contracts right now, bear in mind that friction could arise when it comes to the end of furloughing if returning staff are to work in a different way, or indeed are to be made redundant. There are lots of points to think about.

First, redundancy. The rules on redundancy will not have changed due to furloughing, so if the normal criteria is met, namely a need for fewer staff to carry out work of a particular type, a genuine redundancy situation may exist.  However, consideration needs to be given to the process, for example consultation and creation of fair selection criteria. The process should be followed carefully with records retained in particular addressing the reason for the selection of an individual given that a common complaint may be “why have I been selected for redundancy and not him/her”. Remember that redundancy relates to the cessation of need for the work position, not the individual, and questions surrounding selection of individuals working in the same work position should be based on a number of factors including skills and experience.

Second, furloughing. The furlough scheme was timely as it saved some staff overhead for employers whilst profits plummeted. However, the whole lockdown experience has been a shock for most of us and some businesses, in making decisions to furlough quickly, may not have checked to ensure their contracts don’t contain conflicting clauses.

The scheme ultimately requires the employee to agree to be furloughed. In many cases this meant that employees faced reduced pay rates (equivalent to the furlough grant amount) and at the same time were required to stop working. Unless the employment contract allowed for reductions in pay of this kind (reducing pay can amount to wrongful or unfair dismissal), and temporary layoff (most employment contracts impliedly or expressly require the employer to provide work), the act of furloughing may have resulted in a breach of the employment contract by the employer. Both issues should ideally be addressed as an agreed variation to the employment contract.

This is particularly relevant given that in the early days of furloughing the government guidance did not specify that the worker should agree to the furlough. However agreement is important, and is now a requirement of the furloughing, but early furlough adopters may have missed this as well as the need for contract variation. One hopes that furloughed workers will accept the spirit of furloughing and not make any fuss, but to ensure there is no issue leading to a claim (which hopefully an Employment Tribunal will give short shrift to, but the law is the law) a suitable variation of contract should be concluded swiftly. Ideally this would be whilst the furloughing is still underway bearing in mind the entire scheme is voluntary for employers, and the point of greatest risk, the return to work, has not yet been reached.

Third, return to work. The rate that work picks up will have a direct bearing on the decisions each business makes in terms of staff retention. This in turn will have a direct relevance to the terms of the employment contract. Redundancy aside (see above), considerations will not only include rate of incoming business but should also include assessment of health and safety generally and possibly an entirely new set of rules flowing from government policy.

Decisions will be dependent upon the circumstances of the employers business. Options to consider may include changing work arrangements for employees from full time to part time, switching to a rota or shared basis, changing from working in one office to another (where more space is needed to allow for social distancing), full or part time remote working from home. All decisions about office use will have to take account of social distancing requirements for so long as they continue.

Whatever the reallocation of staff, care should be taken to ensure fairness. Once the decision is made a suitable variation to the employment contract should be agreed with the employee as soon as possible.

Fourth, varying the employment contract to cater for new terms going forwards. Given that in this post lockdown world the variation is likely to reflect a change in employment conditions and possibly pay (in other words for the benefit of the employer), care should be taken to ensure the variation agreement is properly constructed. This is particularly so if the employee is subject to restrictive covenants which the employer wishes to remain enforceable, for example covenants that sales consultants have signed up to. In the recruitment sector specifically maintaining the enforceability of such covenants in respect of consultants, who may want to compete with their employer if the employment is terminated, may become critical.

Any contract is capable of variation by agreement, and variations of employment contracts are no exception, but certain rules must be followed. Variations of these kinds of contract should always be in writing. The existing contract may specify a process for variation, for example variations may not be permitted without the signature of a director of the employer. Any written and agreed rules should be strictly adhered to.

Fifth, changing work related policies. For example, relating to use of premises or facilities, new rules on social distancing, behaviour towards other staff members given changed health and safety concerns, hours of access, processes when using shared equipment and so on. Some employment contracts make employment policies contractual. In those cases changes to policies would amount to a contractual variation and proper process for change should be followed. We always advise that policies should not be contractual and those with non contractual policies need not be concerned about contract variation, instead limiting the change to variation of policy or introduction of a new policy.

Last but not least, a review of your employment contract is always a worthwhile exercise particularly if it is quite old and or has been cobbled together over a long period. If you plan to change terms with employees as discussed above that would be a good time to introduce a new up to date contract. Even if not getting your terms are bang up to date with all the latest changes should provide security against new risks in the post COVID world.

Get help from professionals if you are unsure what to do. As well as employment advice for corporates, we at Lawspeed specialise in contracts of all kinds suitable for recruitment businesses, employment contracts for recruiter staff and sales consultants being a particular area of client interest.

For further assistance with any of the above please email info@lawspeed.com or call 01273 236236.