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Breaking News: Furlough Extended to March 2021

Breaking News: Furlough Extended to March 2021

Key Contact: Claire Knowles

Author: Rebecca Mahon

The Chancellor has just finished speaking in Parliament. In a dramatic announcement, he has confirmed that the furlough scheme will be extended to 31 March 2021.

The Chancellor’s message was quite straight forward. The Bank of England are predicting a slow economic recovery. The economic picture is, frankly, worsening. As such, the Government want to offer businesses and individuals “certainty” and “security through the winter”. The Chancellor said that whilst the health restrictions will only last until the start of December, the financial impact of those restrictions will go on much longer.

The furlough scheme will continue on the current arrangements (employees receive 80% pay for hours not worked, employers will only have to contribute pension and NICs). This will be reviewed in January and employer contributions may increase if the economy picks up.

The scheme will be extended UK wide. The job retention bonus, which was due to be payable to employers who kept on previously furloughed employees until 31st January 2021 will be suspended, to be redeployed at an appropriate time.

Further information is expected over the coming days.

For advice and support on either of the schemes and their detail, please contact our employment team.

Coronavirus Job Support Scheme – Annual Leave Explained

Coronavirus Job Support Scheme – Annual Leave Explained

Key Contact: Claire Knowles

Author: Adam McGlynn

Guidance has now been released regarding the treatment of annual leave under the Coronavirus Job Support Scheme (the JSS). While HM Revenue & Customs waited until the last minute to publish these details, the postponement of the JSS until December now means that employers have an extra month to prepare and strategise. For the month of November, the Coronavirus Job Retention Scheme (the CJRS) has been extended to align with England’s nation-wide November lockdown, further details of which can be found HERE.

Recap on Coronavirus Job Retention Scheme Annual Leave Rules

Under the current, and now extended, CJRS, annual leave is treated much the same as usual. It continues to accrue even when on furlough leave, the employer can require an employee to take their annual leave by giving appropriate notice, and annual leave must be paid at full pay (i.e. 100%). Annual leave and furlough leave can be used simultaneously, in which case the employee must still receive 100% pay but the employer will then be reimbursed by HMRC for that period at the CJRS rate – for the month of November this is increasing to 80% of normal wage but will not include pension or national insurance contributions.

JSS Closed Annual Leave Rules

The JSS Closed scheme is designed for employers whose business is required to close by operation of law for at least seven consecutive days due to Coronavirus restriction measures. This part of the JSS closely resembles the CJRS both in general and in terms of annual leave. Annual leave can be used while placed on furlough leave under a JSS Closed temporary working agreement. The same rules of accrual, requiring employees to take leave, and 100% pay apply, however, the rate of Government reimbursement will be different, currently stated to be 66.67% up to a total of £2083.44 per month.

Why the JSS Open Annual Leave Rules are Different

The JSS Open scheme follows a similar arrangement to the CJRS’s ‘flexible furlough’ principles with a few adjustments including one very important key difference – Employees must work above a certain threshold of minimum hours (currently 20%) in order to be eligible under the scheme. This follows a trend of the Government gradually reducing its level of support and encouraging employers to reintroduce employees to part-time, and ultimately full-time, work. This is very significant for annual leave, however, as considering annual leave as ‘non-working time’, as it is in the CJRS and JSS Closed schemes, would allow employers to claim but make it more difficult to achieve the minimum threshold of ‘working time’.

To address this, annual leave can be taken during either working time or non-working time under the JSS Open. Employers will need to pay the employee 100% pay for either option but, importantly, can then choose to either be reimbursed (currently at 61.67% up to £1,541.75 per month) or to count the leave towards the employee’s hours worked, making it easier to reach the minimum working threshold.

Comment

It is welcome news that HMRC recognised the potential legal issue of discouraging holiday under a JSS Open working arrangement and the flexibility afforded to employers will certainly be useful. Nevertheless, the extension of the CJRS at an increased reimbursement rate of 80% pay grants employers an opportunity to require employees to use their accumulated annual leave at the most efficient rate since July.

For more information on annual leave, the extended CJRS, and the upcoming JSS, feel free to contact our employment team.

Furlough Extended UK Wide

Furlough Extended UK Wide

Key Contact: Claire Knowles

Author: Rebecca Mahon

On Saturday night, Boris Johnson announced that there will be a 4-week lockdown in England from 00.01 on Thursday 5 November until Wednesday 2 December. After weeks of preparation for the JSS Open and Closed, which were due to start today, he also announced that the original Coronavirus Job Retention Scheme (also known as the “the furlough scheme” and the CJRS) will be extended during this time. Whilst the lockdown only applies in England, the extension of the CJRS is nationwide.

The extended CJRS is “more generous” than the support provided to employers in October. Employees will continue to receive 80% pay during hours not worked up to a maximum of £2500, but employers will only need to pay pension and national insurance contributions. This takes us back to the August iteration of the CJRS. The Chancellor confirmed this morning that the scheme will be available to employees who were on the payroll as at 30 October 2020. Further information has been promised “imminently”.

From 3 December 2020, employers will revert back to the Open and Closed Job Support Scheme which was intended to take effect from 1 November 2020. Further details regarding this scheme have been published and updated guidance from the Acuity team will be shared later this week.

For advice and support on either of the schemes and their detail, please contact our employment team.

Understanding the COVID Alert Levels

Understanding the COVID Alert Levels

Key Contact: Claire Knowles

Author: Adam McGlynn

The Prime Minister has announced a new three-tiered system of local COVID alert levels which take effect in England from Wednesday 14 October 2020. The rationale behind this reform is to simplify and standardise Coronavirus rules and restrictions following rising infection rates and concerns that existing systems are complicated and disproportionately implemented.

The new system will include three alert levels: medium, high, and very high. Information on what alert levels apply to which regions can be found on the gov.uk website HERE. Below is a summary of the restrictions which apply at each level. Guidance on sanitation, face coverings, and social distancing continues to apply across all levels and travel between regions of different levels is discouraged.

Medium – Currently applying to the whole of England

  • Social gatherings are limited to 6 people unless all part of a household or support bubble or an exemption applies (the rule of six).
  • Businesses can remain open, including leisure and hospitality venues, but may be subject to curfews, face covering obligations, and data collection obligations.
  • Employees should attend work, but employers should follow COVID-secure guidelines.
  • Students can attend schools and universities, but additional guidance may apply.
  • Places of worship remain open, subject to the rule of six.
  • Weddings and receptions are restricted to 15 attendees, and outdoor funerals to 30.
  • Indoor sport and exercise can continue subject to the rule of six.

High – Supplements the Medium level rules for areas of concern

  • You cannot gather indoors with anyone outside of your household or support bubble but the rule of 6 continues to apply to outdoor gatherings.
  • Businesses can remain open, including leisure and hospitality venues, but may be closed by law, subject to a curfew, or require patrons to remain seated.
  • Indoor sport and exercise with others from different households/ support bubbles is prohibited.

Very High – Supplements the High level rules for areas of the greatest concern

  • In addition to the gathering restrictions at High level, you cannot gather in most outdoor spaces with anyone outside of your household or support bubble. Some exceptions include parks, beaches, and playgrounds which remain subject to the rule of 6.
  • Pubs and bars must close unless they operate as a restaurant.
  • Local authorities may close additional venues including entertainment venues and gyms.
  • Wedding receptions must not take place.

Additional guidance applies to those individuals categorised as clinically extremely vulnerable.

Comment

As the UK has adapted to the Coronavirus pandemic it has become possible to introduce more flexible and focused responses. However, as infection rates have increased in recent weeks, discrepancies and inadequacies in local approaches have become apparent. It is hoped that this new system will result in greater simplicity and consistency. However, the restrictions at each level, especially ‘very high’ have built in flexibility, meaning that different businesses and local authorities can respond differently both within and across regions. Though the new system provides some general guidance, discrepancies in application are likely to cause continuing confusion. At the point of writing this three-tier system only applies to England and so existing local lockdown restrictions will continue to apply across the devolved nations.

If you are concerned about what restrictions may apply to your business, want to implement necessary changes efficiently, or need support managing staff and headcount during periods of reduced workload or closure, please contact our Employment team.

COVID-19 Support: New Support Announced for Businesses in Wales

COVID-19 Support: New Support Announced for Businesses in Wales

Key Contact: Christian Farrow

Author: Chris Doherty

The Welsh Government has announced two new schemes which will offer a total of £140 million in grants to support Welsh businesses impacted by the Coronavirus pandemic. The new schemes have been introduced following a series of “local lockdowns” in Wales, which will impose increased restrictions targeted at maintaining social distancing and curbing the spread of the virus.

A £60 million “Rapid Reaction (Local Lockdown) Fund” will offer grants of £1,500 to business in the retail, leisure and hospitality sectors with a rateable value of £12,001 to £50,000, and grants of £1,000 to small businesses with a rateable value of £12,000 or less, in each case where the business can demonstrate that local lockdown rules have had a “material impact” on them. £3 million of the fund will be made available to “locked-down” local authorities to award discretionary grants of £1,500 to affected businesses not registered to pay business rates.

The second ‘match-funding’ scheme, worth £80m, will serve as the third stage of the Welsh Government’s Economic Resilience Fund (ERF). This scheme is targeted at businesses who can demonstrate plans for post-coronavirus recovery and will consist of:-

  • grants of up to £10,000 to micro-businesses (employing up to nine people) that contribute match funding of 10%;
  • grants of up to £150,000 to small businesses (employing 1 to 49 people) that contribute match funding of 10%;
  • grants of up to £150,000 to medium-sized businesses (employing 50 to 249 people) that contribute match funding of 20%; and
  • grants of up to £200,000 to larger businesses (employing more than 250 people) that contribute 50% match funding.

A quarter of the match-funding scheme has been earmarked for the tourism and hospitality sector.

The Eligibility Checker for companies to find out if they can access funding from the third phase of the ERF will go live during week commencing 5 October 2020. Applications for the new schemes are expected to open by the end of October.

For further information and guidance please contact our corporate team.

Winter Economy is Coming: The Job Support Scheme Announced!

Winter Economy is Coming: The Job Support Scheme Announced!

Key Contact: Claire Knowles

Author: Adam McGlynn

As the end of the Coronavirus Job Retention Scheme (the Retention Scheme) fast approaches on 31 October, Chancellor of the Exchequer, Rishi Sunak, has announced its successor as part of his Winter Economy Address. The new Job Support Scheme on 1 November will target businesses facing lower demand due to COVID-19 over the next six months.

Eligible Employers

Current guidance imposes relatively few restrictions on employer eligibility. Businesses will need a UK bank account and UK PAYE scheme in place but, unlike the flexible furlough scheme, the business will not need to have utilised the Retention Scheme in the past. All small and medium enterprises satisfying these criteria will be eligible but large businesses will need to meet an as yet undetermined financial assessment test, proving that their turnover has seen a reduction due to the disruption caused by COVID-19. These large businesses will be expected to avoid making capital distributions while accessing the Job Support Scheme, however, it is currently unclear whether this will be an eligibility requirement or not.

Eligible Employees

A Real Time Information submission will need to have been made in relation to the employee’s payment through the employer’s PAYE payroll on or before 23 September. In order for employers to make a claim the employee will need to work at least 33% of their usual hours for a period of at least seven days. Though further guidance is anticipated, we expect ‘usual hours’ to be calculated in the same manner as the calculations for flexible furlough under the Retention Scheme. Short-time working arrangements must be agreed with employees where necessary to vary existing contractual terms and such agreements must be made available to HMRC if requested. Employers will not be eligible to claim for employees who have been made redundant and, unlike the Retention Scheme, employees who are put on notice of redundancy during the claim period will also be ineligible.

Grant

Employees will be paid by their employer for hours actually worked, which will amount to at least 33% of their usual wage. The employee’s usual hours which are not worked will be split into three:

  • One third will be paid by the employer and will be reimbursed by the Job Support Scheme;
  • One third will be paid by the employer but not reimbursed; and
  • One third will be sacrificed by the employee.

Government grants under the Job Support Scheme will be made to the employer in arrears and will be capped at £697.92 per employee, per month. Employers will still be obliged to pay NICs and pension contributions, but these will not be reimbursable. Pay for hours not worked will be calculated by reference to the employee’s usual wage which is expected to follow a similar methodology to the Retention Scheme. Current guidance suggests that employers cannot ‘top up’ wages for hours not worked beyond the two-thirds contribution; however, it is not yet confirmed whether this will be enforced.

Comment

By working at least 33% of their usual hours and receiving a two-third contribution for hours not worked, employees participating in the Job Support Scheme will receive at least 77% of their usual wages. 55% of this (the 33% time worked plus one-third of the time not worked) will be at the employer’s expense while the other 22% (on-third of time not worked) will be paid by the employer but reimbursed by the government. The minimum working time for eligible employees will be reviewed after three months when it is expected to increase, reducing the maximum amount of non-working time and, therefore, the government’s maximum contribution.

The maximum government grant under the Job Support Scheme is attainable for employees nearing the minimum threshold of hours actually worked. However, employees on this end of the spectrum are also entitled to the maximum contribution for hours not worked from the employer, making it the most beneficial situation for the employee, but the least efficient situation for the employer. The Job Support Scheme is therefore most appealing to employers who can utilise the employee for the majority of their usual hours but anticipate small periods of low work-flow where the employer would rather contribute only one-third of the employee’s usual wage. Although the grant can be accessed in addition to the previously announced Job Retention Bonus, the bonus is not particularly incentivising either unless the employee is working the majority of their usual hours in any event.

For more updates and guidance on the Job Support Scheme, or any of the government’s coronavirus response schemes, please contact our Employment Department.

Claire Knowles – Partner

Mark Alaszewski – Associate

Rebecca Mahon – Solicitor

Adam McGlynn – Solicitor

LEGAL UPDATE: Corporate Insolvency and Governance Act 2020 – Times Extended

LEGAL UPDATE – Corporate Insolvency and Governance Act 2020 – Times Extended

Key contact: Hugh Hitchcock

Authors: Hannah Jones & Michael Hinder

HMG yesterday (24.9.20) brought into force a new statutory instrument to extend the operation of several COVID-19 related restrictions and measures that were enacted in the Corporate Insolvency and Governance Act 2020.

A number of these measures were due to expire on 30 September 2020, but will now expire on one of three new dates as noted below:

  • Statutory demands and winding-up petitions will continue to be restricted until 31 December 2020.
  • Termination clauses are still prohibited – Small suppliers will remain exempted from the obligation to supply until 30 March 2021.
  • Companies and other qualifying bodies with obligations to hold Annual General Meetings will continue to have the flexibility to hold these meetings virtually until 30 December 2020.
  • Modifications to the new moratorium procedure, relaxing the entry requirement to it, will also be extended until 30 March 2021. A company may enter into a moratorium if they have been subject to an insolvency procedure in the previous 12 months.  Measures will also ease access for companies subject to a winding up petition. The temporary moratorium rules will also be extended to 30 March 2021.

These extensions were essential. It gives businesses continued breathing space to restructure the debt accumulated over this crisis and seek advice where necessary.

For more information on this topic, contact the Litigation Team.

Security for Costs and COVID-19: International Pipeline Products Limited v IK UK Limited & Others

Security for Costs and COVID-19: International Pipeline Products Limited v IK UK Limited & Others

Key Contact: Hugh Hitchcock

Author: William Rees

Security For Costs

An order for security for costs offers a party (usually a defendant) protection from the risk of their opponent engaging them in costly proceedings but not being able to pay the (usually defending) party’s costs of defending the litigation if ordered to do so. A successful applicant can obtain an order from the court that their opponent (normally the claimant), pays a sum into court which the defending party can later use to pay its costs if so ordered.

The conditions a party seeking security for costs must satisfy are set out in CPR 25.13:

(1) The court may make an order for security for costs if –

(a) it is satisfied, having regard to all the circumstances of the case, that it is just to make such an order; and

(c) the claimant is a company or other body (whether incorporated inside or outside Great Britain) and there is reason to believe that it will be unable to pay the defendant’s costs if ordered to do so;

There are numerous relevant factors to be considered in the court’s determination as to whether an applicant has made out that it is “just to make such an order”. Such factors include the following non exhaustive list by way of example:

  • The ground on which the application is based.
  • The respondent’s ability to comply with any order made.
  • The likelihood of the claim succeeding. A genuine claim with good prospects should not be “stifled” by a security for costs application.
  • Whether the claim is bona fide or a sham.
  • Admissions by the defendant.
  • Whether the claimant’s financial position was caused by the defendant’s actions.
  • Open offers and payments into court

The Dispute

Recently, the Intellectual Property List of the High Court gave judgment on International Pipeline Products Limited (IPPL) v IK UK Limited (IKUK) & Others [2020]. The Claimant and the first Defendant both operate in the oil and gas industry, specifically providing products and services used in the maintenance and repair of oil and gas pipelines.  The dispute arose from a failed corporate transaction wherein one of the defendants was due to purchase the Claimant company but the transaction did not complete. The Claimant alleged that, amongst other points, whilst in the Claimants employment, the defendants stole equipment and confidential information from the Claimant.

In his judgment, Deputy Judge Stone was asked to consider the impact of the COVID-19 pandemic and resulting economic downturn on the application, with the Defendants attempting to rely on the negative effects on the claimants business as part of their application for security for costs and argument that the Claimant would not be able to pay the Defendants costs if so ordered.

The Defendants produced and relied upon evidence of the difficulties the oil and gas industry are experiencing at the moment as a result of Covid 19. However, Deputy Judge Stone pointed out the general troubles of the oil sector were largely caused by an oversupply in oil due to distorted energy demand caused by lockdowns and that such evidence did not persuade him as the Claimant is specifically involved in repair and maintenance of pipelines.

Despite the fact that an executive of the Claimant company in evidence estimated that COVID-19 had caused a reduction in inquiries of around 10% but remained in a good trading position, Deputy Judge Stone rejected the Defendants application on the basis that he was “unable to conclude at this point in time that the impact of COVID-19, any economic downturn, or the current state of the oil and gas industry are such as to detract from the Claimant’s ability to pay the Defendants’ costs so as to be satisfied that there is reason to believe that the Claimant will be unable to pay”.

This is of course not to say that COVID- 19 and its effects on a party to a dispute could not be effectively relied upon by an applicant to succeed in a security for costs application. However, with COVID-19 likely having a lingering effect on the economic outlook for the foreseeable future, this body of law may well develop.

The courts will have a challenging task ahead in incorporating the economic impact of COVID-19 in security for costs applications. Public policy would dictate that it cannot be used to stifle genuine claims and the approach of the UK courts has broadly been to prevent parties from being placed under further financial pressure due to COVID-19. These factors could play into whether it is “just to make such an order” pursuant to CPR 25.13. These factors must however be balanced with Defendants being able to obtain protection from suffering financial ruin themselves should they successfully defend an action but are unable to recover their costs.

For more information on the topic covered, please contact our Litigation Team.

Summer statement 2020 – a quick look at the Chancellor’s key employment-related points

Summer statement 2020 – a quick look at the Chancellor’s key employment-related points

Key contact: Claire Knowles

Author: Rebecca Mahon

Britain has now entered the second phase of the Government’s economic response to the coronavirus crisis. At lunchtime yesterday, the Chancellor Rishi Sunak delivered his summer statement. In his opening remarks, he confirmed he would be announcing a “plan for jobs” to protect, create and support employment, and this included the following major announcements:

Furlough scheme

As already confirmed, the furlough scheme will start “winding down” from next month, with the amount that employers can recover from the scheme gradually reducing from 1st August. The scheme will come to an end on 31 October. The Chancellor has announced that if an employer brings an employee back from furlough and that employee is still employed as at 31 January 2021 then the employer will receive a £1000 “furlough bonus” for that retained employee.

Comment: this proposal looks well-intentioned but we would question if it is a good use of public money. £1000 is unlikely to be a sufficient sum of money to prevent struggling businesses from making redundancies if it is uneconomic for them to continue to employ staff. It also appears that all employers who have made use of the Furlough scheme will be able to access the bonus irrespective of whether they ever intended to make redundancies so it may provide an unjustified windfall for less scrupulous users of the scheme. As with the main job retention scheme it is difficult to see why the government has not adopted a more sector specific approach which recognises that the economic impact of the coronavirus pandemic has not been evenly spread. We await further updates on this.

Kickstart scheme

The Chancellor announced a “kickstart” scheme for employers that create jobs for people between the ages of 16-24. Under the scheme, the Government will pay the wages of new employees between the ages of 16-24 for 6 months.

Comment: certain industries (construction, manufacturing, retail) could really benefit from this scheme. The primary criticism of the proposed scheme, as of this afternoon, is that it may lead to a situation where employers are “playing the system”, hiring employees for 6 months and then dismissing, leading to a high turnover of staff. This is something that we, as an economy, have been trying to move away from under the Good Work Plan reforms and as such, we expect there to be stringent restrictions on how the scheme is used.

Apprenticeship support

Companies that take on apprentices will now get a payment of £2000 per apprentice. If the apprentice is over 25, the “bonus” is reduced to £1500. This bonus is only available for employers that apply for it between August 2020 and January 2021.

Comment: this is also likely to benefit industries such as construction, manufacturing and retail. But the scheme is only available for the next few months. Some industries are not even sure whether they will be fully re-open before the end of the year and so unfortunately, taking on an apprentice is unlikely to be a priority.

In addition to the key employment points flagged above, the Chancellor also announced VAT cuts for the hospitality, reducing VAT from 20% to 5% on food, accommodation and attractions for the next 6 months. There is also a new “Eat Out to Help Out” scheme being launched, which businesses can apply for from Monday (via a dedicated website – yet to go live). During August, participating restaurants will be able to offer 50% off to customers on food ordered on Monday – Wednesday and claim the rest back from the government (up to maximum of £10 per head). It’s not clear whether the discount will be accessible to restaurants offering takeaways.

We are expecting further guidance on these announcements to be made available in the coming weeks and will report on this as and when it becomes available. In the meantime, please do not hesitate to contact our employment team if you have any questions on the Chancellor’s summer statement or if you need any further assistance.

Claire Knowles – Partner

Mark Alaszewski – Associate

Rebecca Mahon – Solicitor

Adam McGlynn – Trainee Solicitor

‘Recovery Roundtables’ Launched for Economic Bounce-Back

‘Recovery Roundtables’ Launched for Economic Bounce-Back

Key Contact: Natalie Jones

Author: Joe Smith

On 8 June 2020, the Government announced that a number of working groups have been launched this week in the hope of providing a strategy for the bounce-back of business and economic growth.
The Business Secretary Alok Sharma, who is responsible for heading these groups, has explained that there will be a total of five working groups, each made up of around 20-25 participants. Each working group will consider on how economic growth can be revitalised through five key focus areas.
According to the Government, the focus areas that the working groups will explore are: –

  • The future of industry: How to accelerate business innovation and leverage private sector investment in research and development
  • Green recovery: How to capture economic growth opportunities from the shift to net zero carbon emissions
  • Backing new businesses: How to make the UK the best place in the world to start and scale a business
  • Increasing opportunity: How to level up economic performance across the UK, including through skills and apprenticeships
  • The UK open for business: How to win and retain more high value investment for the UK

The membership of the five working groups has not yet been published by the Government, although it has confirmed that the Secretary of State will chair the groups. It will also offer individuals and those interested in the initiative to produce written submissions to the working groups, and this will hopefully allow business to share their points of view and experiences.

The working groups will not only look at the short terms solutions on opening up business sectors which have shut down due to the pandemic, but will also look towards the medium and longer term, with increased jobs and a greener economy being listed as key aims of the bounce-back. The working groups will also look at economic growth and business growth from a national and international perspective.

For more information on any of the topics raised, please get in touch with our Corporate Team.

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