Furlough Scheme 2021: as the scheme winds down, litigation goes up

Since the pandemic struck plunging many aspects of life into lockdown, it is undisputed that the Coronavirus Job Retention Scheme (CJRS) has saved thousands of businesses and many more jobs.  Indeed, a recent report from the Resolution Foundation found that the initial forecast of huge unemployment did not materialise due to this initiative of the furlough scheme between 2020 to 2021.

The introduction of furlough was a clear masterstroke by the Chancellor.  Employers have paid staff on furlough 80% of their usual wages (up to £2,500 per month) and employers have been able to reclaim these wages through the CJRS.  At the peak in May 2020 approximately 8.9 million were on the scheme.

Notwithstanding its benefits, furlough has caused confusion for employers and employees alike with the rules being varied or clarified and the scheme extended on a number of occasions.  For example, whilst originally the scheme was intended to assist businesses forced to close or experiencing a downturn, more recently it was clarified that the CJRS was available for those who were ‘adversely affected by coronavirus’, notwithstanding business need.  This included those unable to work for reasons related to COVID-19 to include sick leave or childcare obligations (for example during school closures). 

The implementation of the furlough scheme 2021 by employers has varied and this has led to concern and claims from employees. Employment Tribunal decisions have started to trickle through at an increasing pace this year.

The most recent case, heard in the London Central Employment Tribunal – Jimenez v Firmdale Hotels Plc – saw the Claimant succeed in his claim that he suffered unlawful victimisation when he was denied the option of furlough.  In the facts of this case, prior to the pandemic Mr Jimenez had brought previous employment tribunal claims against his employer in relation to which he was unsuccessful.  Soon after the pandemic hit the CJRS was introduced in March 2020. The hotel employer proceeded to furlough its employees with the exception of Mr Jimenez. 

It was the employer’s submission that Mr Jimenez was on long-term sick leave at the time furlough became an option and therefore mistakenly considered that he was not eligible to be placed on furlough under the scheme rules.  Employment Judge Segal found that the employee queried this with his employer who did not consider and respond to him with an adequate explanation.  It was therefore found that the employer victimized him in accordance with Section 27 of the Equality Act 2010.  This legislation protects employees after they raise a complaint, concern or claim to / against their employer and then suffer a detriment as a result of raising that complaint.

In another recent case of Mhindurwa v Lovingangels Care Limited the tribunal made a similar finding that the Claimant was unfair dismissed in the early months of the pandemic.  Although the tribunal acknowledged that it was a genuine redundancy situation, Employment Judge Gumbiti-Zimuto commented that “in July 2020, a reasonable employer would have given consideration to whether the claimant should be furloughed to avoid being dismissed on grounds of redundancy”.

In contrast, in the case of Handley v Tatenhill Aviation Ltd the tribunal found that the redundancy dismissal of an employer who had been on furlough for a few weeks was fair.  In this case it was acknowledged that while another employer may have continued to retain the employee on the CJRS, this employer needed to reduce costs and so it was not a substantively unfair dismissal, if they did not and proceeded with the redundancy process.  In this case the Claimant succeeded to show that the dismissal was procedurally unfair.

In this case Employment Judge Ayre commented “whilst another employer may have taken a different approach and chosen to leave the claimant on furlough for longer, it cannot be said that it was unfair of the respondent not to do so. It is for an employer, not the employment tribunal, to decide how to structure its business and whether to make redundancies. I accept the respondent’s evidence that it needed to cut costs irrespective of the furlough scheme, and that it wanted to use the furlough scheme to pay some of the costs of making the redundancy. The nation was in unprecedented uncertainty at the relevant time, and it is not for me to step into the shoes of the employer and substitute my view for that taken by the employer at the time. The decision to dismiss the claimant nothwithstanding the existence of the furlough scheme does not, in my view, render the dismissal unfair.”

Whilst the CJRS was introduced to avoid redundancies and save jobs, this last case highlights that retaining employees on the CJRS indefinitely was not necessarily the only option an employer could take. Indeed, employees on furlough still involve a cost to employers which increased again in July this year.  

As the furlough scheme 2021 is due to cease at the end of this month it is predicted that up to 900,000 continue to remain on furlough leave.  Employers will either need to welcome the employees back to work, consider redundancy or consult with their staff regarding any changes to their terms and conditions of employment.  Other employees may choose to take advantage of the healthy jobs market and look elsewhere for their next employment opportunity.  Either way, we can expect some movement in the employment market in the coming weeks which may be welcome by some but will cause hardship and concern among others as their income dries up and they experience challenges with seeking employment opportunities in the post pandemic landscape.

You may also be interested in previously didlaw blogs on furlough cases to include one involving an agency worker which can be found here and another exploring whether the scheme discriminates here.

This blog is by Caroline Oliver, Senior Solicitor, didlaw.