David Reade QC and Daniel Northall provide a third update on the Government’s Coronavirus Job Retention Scheme. This update should be read in conjunction with the first and second updates published on 26 and 27 March 2020 respectively.
As employment lawyers scramble to turn the Government’s pithy policy statements on the Coronavirus Job Retention Scheme into practical advice for their clients, it would be easy to overlook the very different approach the Government is taking in the application of the scheme between the private and public sector.
The current guidance on the application of the scheme to public sector employers is limited to a few short paragraphs, but they are far reaching. Given their brevity, this update will not be overly lengthened by quoting them in full.
Public sector organisations
The government expects that the scheme will not be used by many public sector organisations, as the majority of public sector employees are continuing to provide essential public services or contribute to the response to the coronavirus outbreak.
Where employers receive public funding for staff costs, and that funding is continuing, we expect employers to use that money to continue to pay staff in the usual fashion – and correspondingly not furlough them. This also applies to non-public sector employers who receive public funding for staff costs.
Organisations who are receiving public funding specifically to provide services necessary to respond to COVID-19 are not expected to furlough staff.
In a small number of cases, for example where organisations are not primarily funded by the government and whose staff cannot be redeployed to assist with the coronavirus response, the scheme may be appropriate for some staff.
These paragraphs give a stark warning to public sector employers that the Government does not expect its employees to be furloughed in large numbers, if at all.
The guidance appears to separate public sector organisations into three categories:
The rationale for the first and second categories seems clear enough. Such public or publicly funded organisations continue to be fully operational and their staff are likely to work at full capacity and be paid accordingly.
There is also a superficial justification for the third category. If staff wages come from public funds, there is no purpose to furloughing such staff since public funds would be replaced merely by a different source of public funds.
However, one can conceive of problem cases falling within the third category. Many non-governmental organisations may have received a parcel of public money for no defined purpose other than the provision of its services. That money may also only represent a proportion of its operating costs. Other organisations may have received public money for the completion of specific tasks or projects which may have neared completion as their operations ground to a halt because of COVID-19.
The guidance acknowledges that public sector organisations are not precluded from accessing the job retention scheme in principle, but there is no clear guidance on the circumstances in which employers falling within the third category have a right of access.
The only indication comes from the statement that: where organisations are not primarily funded by the government and whose staff cannot be redeployed to assist with the coronavirus response, the scheme may be appropriate for some staff. This tends to suggest that, where the employing organisation is not wholly or mainly funded by public money and staff cannot be redeployed to assist in the effort to combat COVID-19, the employer may in principle access the scheme. Certainly, such an approach would limit the scope of the third exclusion.
Although it will be necessary to see further guidance, it is difficult to see that a private sector employer who contracts to provides services to public bodies can be said to be “receiving public funding for its staff costs”, unless there is a direct correlation between the payment for the services and the staff costs. To take the example of a security company which provides security staff for a government building which has been closed because of COVID-19 , it must be assumed that the intention is that they would continue to receive payment and would therefore be expected to pay its staff even though they had no duties to perform. Absent that the position is unclear, if the private sector employer receives most of their income from the government through contracts to render services. In the example given above, would it depend on whether they had any ability to redeploy the security guards? This may mean the process of applying to the scheme demands more detailed information about the impact of COVID-19 on the business than is contemplated in the current guidance.
Where there is no obvious right of access and the employer does not have the funds to sustain continued employment during the anticipated suspension of their activities, redundancy may be the only alternative.
Although the Government guidance expects staff to be paid from public funds irrespective of the availability of work, strictly it does not limit an employer’s right to lay off staff or put them on short-time working, if the employer is able to do so under the contract. However, there are likely to be few examples of express lay-off clauses in public sector employment contracts.