Concerns have been raised that employers could fail to qualify for the new Coronavirus Job Retention Scheme by not asking for explicit employee consent to be placed on furlough.
Official government guidance to the scheme states that any changes to an employee’s contract only required the organisation to write to the employee to confirm that they had been furloughed.
Previous iterations of the guidance have been issued on 26 March, 4 April and 9 April, and were last updated today, on 20 April.
Coronavirus working arrangements
The guidance has continued to state: “To be eligible for the grant employers must confirm in writing to their employee confirming that they have been furloughed.
“If this is done in a way that is consistent with employment law, that consent is valid for the purposes of claiming the CJRS. 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.”
However, according to the latest version of the Treasury Direction, which sets out the legal basis for the scheme, HMRC would only deem arrangements valid “if the employer and employee have agreed in writing (which may be in electronic form such as an email), that the employee will cease all work in relation to their employment”.
According to Charles Wynn Evans, partner at law firm Dechert, the stricter requirements of the scheme’s legal framework mean that “formal documented consent is clearly now the preferable approach given this lack of consistency”.
Employment barrister Daniel Barnett, who operates from Outer Temple Chambers, has said there could be further complications in complying with HMRC’s requirements that could mean HMRC refuses to meet certain claims.
Writing on the disparity between the guidance and the Direction, in conjunction with tax barrister Max Schofield, he said that contacting employees retrospectively to gain agreement to cease all work may not be sufficient as the guidance implies that employers notify staff before the period of furlough starts.
Furthermore, the constant revisions and updates to its guidance could leave HMRC open to a judicial review, they added.
“Judicial review claims can be brought on a number of different grounds. Irrationality is discussed below, but the most likely challenge to decisions made under the Scheme in light of the above will be on the basis of what is called ‘legitimate expectation’, that is: the employer expected to be treated in a particular favourable way by HMRC because of something HMRC said or did, but was treated differently.
“A typical case of legitimate expectation is based on a public body giving guidance that they will make a particular decision in a particular way but then acting differently when it comes to actually making the decision.”
Barnett and Schofield pointed out that the scheme has been introduced “in difficult and time-pressured circumstances”, but that “this led to the bizarre situation whereby various iterations of the Guidance were released by HMRC before they even had any legal power to administer the Scheme.
“This has led to information changing and a possibility of employers being unfairly treated.”