Early guidance for administrators considering furlough (UK)
Earlier this week, Mr Justice Snowden gave the first judgment on the Government’s Coronavirus Job Retention Scheme [here]. Rather than bask in the Bank Holiday sunshine digging into his Easter eggs, he sought to bring clarity to some of the more murky aspects of the scheme – specifically, how the Scheme operates when the employer is in administration. The case concerned Carluccio’s restaurant chain which entered administration as a result of the restrictions imposed by the Government to reduce the spread of COVID-19.
At the time of Mr Justice Snowden’s judgment, the Scheme was explained in Government guidance alone. Those who have been advising businesses on the basis of this vague and constantly evolving guidance will note that the judge sensibly chose to focus his advice on existing law and to avoid entirely any debate on how the guidance might be interpreted. He was also careful to note that his judgment and the directions he gave to the Administrators could be trumped by legislation implementing the Scheme if and when that is available.
Since the judgment the Chancellor has provided further information on the Scheme in the form of a Treasury Direction made under the Coronavirus Act 2020. There is, however, nothing in this that would disturb the decisions reached by the judge although it does add a further layer of complexity and confusion to the “opt-in” vs “opt-out” debate to furloughing. You can read more about this [here] and [here].
Mr Justice Snowden’s judgment will give some comfort to Administrators wanting to claim under the Scheme and pay out to employees. It will also be of interest to in-house solicitors and HR professionals for its discussion of taking the “opt-in” (rather than “opt-out”) approach when proposing to furlough.