David Reade QC and Daniel Northall provide their fourth update on the Coronavirus Job Retention Scheme and examine the relationship between furlough and annual leave.
To quote Donald Rumsfeld’s rhetorical masterpiece:
there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns—the ones we don’t know we don’t know
With the JRS there are precious few known knowns, plenty of known unknowns and one suspects a few unknown unknowns; that is to say, things we only realise we didn’t know when the detailed rules of the scheme are published.
The reasons for this are now clear to us. The orthodox law-making process of consultation/legislation/implementation has been turned on its head by the unique circumstances of the Covid-19 pandemic. Consultation has largely disappeared and implementation has been forced ahead of legislation. Employers are left having to plan the organisation of their workforce based on a promise of a scheme that is yet to materialise. In providing practical advice, employment lawyers are required to make sense of the many unknowns.
The relationship between furlough and annual leave is, at the very least, a known unknown. (We will resist the urge to refer to annual leave as ‘holiday’ given that any recipient of annual leave is unlikely to be holidaying in the traditional sense for some time). Can an employer manage annual leave during a period of furlough in the same way that it would during normal periods of work? The guidance published by the Government to date provides no clear answer to this question, despite it being of considerable importance to employers. If annual leave continues to accrue during furlough (and indications to date are that it will) employers will be faced with a significant additional annual leave liability on furlough coming to an end if they cannot require their workers to take annual leave during the furlough period. The problem is especially acute with four bank holidays in the months of April and May and with many contracts of employment designating bank holidays as annual leave days which contribute towards the worker’s annual entitlement.
There is then the question of the compatibility of annual leave with furlough. If annual leave is deemed incompatible with furlough, in the sense that a given day cannot both be a day’s leave and a day’s furlough, does that give rise to the prospect of annual leave ‘breaking’ the period of furlough. The employer would not then have furloughed the worker for the minimum prescribed period of three weeks and so may have no right to claim under the scheme. There is of course the imminent prospect of the first bank holiday on 10th April 2020, Good Friday. Many employers have already placed employees on furlough, and sought to backdate the period to the point duties stopped, but does Good Friday break the accrual of the 3-week furlough period if it is a holiday under the contract of employment? A practical view on the scheme would anticipate the answer to be clearly no. Employees would simply be carrying out no work, nor providing any services, as in on any other day during furlough. Recent developments have raised uncertainty over the issue.
On 31 March 2020, ACAS published guidance on using holiday during the coronavirus pandemic, which can be found at the following link: https://www.acas.org.uk/coronavirus/using-holiday
The guidance expressly recognises an employer’s right (pursuant to Reg.15 WTR) to tell workers when to take annual leave, subject only to the double notice rule.
It also deals in part with the amendment to Reg.13 WTR brought about by The Working Time (Coronavirus) (Amendment) Regulations 2020, the effect of which is to permit a worker to carry over accrued but untaken annual leave where “in any leave year it was not reasonably practicable for a worker to take some or all of the leave to which the worker was entitled under this regulation as a result of the effects of coronavirus (including on the worker, the employer or the wider economy or society)”. The leave which may be carried over is limited to the 4 weeks of annual leave guaranteed by Reg.13 WTR and does not include the additional 1.6 weeks guaranteed by Reg.13A.
The guidance gives three examples of where a worker “cannot take holiday due to coronavirus”, namely:
- the worker is self-isolating or is too sick to take holiday before the end of their leave year
- they have been temporarily sent home as there is no work (‘laid off’ or ‘put on furlough’)
- they have had to continue working and could not take paid holiday.
The third category is uncontroversial. The first category appears to recognise an extension of the Stringer principle to those who are not incapacitated due to sickness but who are unable to work due to self-isolation (and who would qualify for SSP under the Statutory Sick Pay (General) (Coronavirus Amendment) Regulations 2020).
The second category is more troubling. Implicit within it is the suggestion that being put on furlough is an obstacle to a worker taking annual leave such that annual leave and furlough are mutually exclusive.
Unfortunately, the guidance does not explain why a worker “cannot take holiday” when put on furlough.
It is important to remind ourselves that a worker’s entitlement to annual leave is part of the overall scheme to ensure workers receive sufficient rest, which includes the right to daily and weekly rest periods and rest breaks. ‘Rest’ in this context is simply the antithesis of work and is any period in which the worker is free from the obligation to provide work.
Although furlough is a concept novel to employment law, its nearest analogue in terms of existing authority is the decision of the Supreme Court in Russell v Transocean. The case concerned the shift patterns of oil rig workers. Their shifts were arranged on a rotating pattern so that each worker spent a fixed period offshore working on the oil rig, followed by a fixed period onshore referred to as a ‘field break’. The employer required workers to take their annual leave during their field breaks. The workers complained that such periods could not qualify as annual leave as they were under no obligation to work during field breaks.
The Supreme Court rejected that contention. It held that a “rest period” simply meant any period which was not working time and included every such period irrespective of where the worker was at that time and what he was doing, so long as it was a period when he was not working.
ACAS’s indication that workers on furlough cannot take annual leave is difficult to reconcile with the decision in Russell. Furlough is a period in which the worker is released from the obligation to work or provide services, but that fact alone does not prevent an employer from requiring staff to take annual leave during furlough on a strict application of the decision in Russell.
One possibility is that ACAS had in mind the argument that annual leave cannot release a worker from the obligation to provide work if there was never an obligation to provide work in the first place. However, that does not seem a satisfactory answer to the point made in Russell that annual leave need not be taken at a time when the worker was otherwise required to work.
Another possibility is that ACAS believes annual leave will be deemed incompatible with furlough as a matter of principle and will be added to the categories of case in which a worker is limited in their ability to take annual leave, which categories include sickness (Stringer), maternity leave (Merino Gomez) and employer deterrence (King)
Speculation aside, we are left with the tantalising question of why the ACAS guidance is expressed in these terms. Either it is wrong, or it takes an alternative view of the law, or ACAS has an insight into the future scheme rules and accompanying legislation which employment lawyers do not.
Employment lawyers are now left in the invidious position of advising clients on their ability to require staff to take annual during periods of furlough based on conflicting information. Existing case law suggests it is permissible. The ACAS guidance suggests not. In the light of the ACAS guidance the cautious approach would be not to direct employees to take holidays before the accrual of the minimum 3-week period of furlough.
David Reade QC
Daniel Northall
0800
2 April 2020
- oliday.
The third category is uncontroversial. The first category appears to recognise an extension of the Stringer principle to those who are not incapacitated due to sickness but who are unable to work due to self-isolation (and who would qualify for SSP under the Statutory Sick Pay (General) (Coronavirus Amendment) Regulations 2020).
The second category is more troubling. Implicit within it is the suggestion that being put on furlough is an obstacle to a worker taking annual leave such that annual leave and furlough are mutually exclusive.
Unfortunately, the guidance does not explain why a worker “cannot take holiday” when put on furlough.
It is important to remind ourselves that a worker’s entitlement to annual leave is part of the overall scheme to ensure workers receive sufficient rest, which includes the right to daily and weekly rest periods and rest breaks. ‘Rest’ in this context is simply the antithesis of work and is any period in which the worker is free from the obligation to provide work.
Although furlough is a concept novel to employment law, its nearest analogue in terms of existing authority is the decision of the Supreme Court in Russell v Transocean. The case concerned the shift patterns of oil rig workers. Their shifts were arranged on a rotating pattern so that each worker spent a fixed period offshore working on the oil rig, followed by a fixed period onshore referred to as a ‘field break’. The employer required workers to take their annual leave during their field breaks. The workers complained that such periods could not qualify as annual leave as they were under no obligation to work during field breaks.
The Supreme Court rejected that contention. It held that a “rest period” simply meant any period which was not working time and included every such period irrespective of where the worker was at that time and what he was doing, so long as it was a period when he was not working.
ACAS’s indication that workers on furlough cannot take annual leave is difficult to reconcile with the decision in Russell. Furlough is a period in which the worker is released from the obligation to work or provide services, but that fact alone does not prevent an employer from requiring staff to take annual leave during furlough on a strict application of the decision in Russell.
One possibility is that ACAS had in mind the argument that annual leave cannot release a worker from the obligation to provide work if there was never an obligation to provide work in the first place. However, that does not seem a satisfactory answer to the point made in Russell that annual leave need not be taken at a time when the worker was otherwise required to work.
Another possibility is that ACAS believes annual leave will be deemed incompatible with furlough as a matter of principle and will be added to the categories of case in which a worker is limited in their ability to take annual leave, which categories include sickness (Stringer), maternity leave (Merino Gomez) and employer deterrence (King)
Speculation aside, we are left with the tantalising question of why the ACAS guidance is expressed in these terms. Either it is wrong, or it takes an alternative view of the law, or ACAS has an insight into the future scheme rules and accompanying legislation which employment lawyers do not.
Employment lawyers are now left in the invidious position of advising clients on their ability to require staff to take annual during periods of furlough based on conflicting information. Existing case law suggests it is permissible. The ACAS guidance suggests not. In the light of the ACAS guidance the cautious approach would be not to direct employees to take holidays before the accrual of the minimum 3-week period of furlough.
David Reade QC
Daniel Northall
0800
2 April 2020
