Employment Law Cases

Mones v Lisa Franklin Ltd

An employee’s furlough pay can be calculated in accordance with the terms agreed upon by the employer and employee through a variation in the employee’s contractual terms. The formula set out in the Treasury Directions governing the Coronavirus Job Retention Scheme (CJRS) was not mandatory for employers to use and did not supersede existing employment law rights and obligations.

Background

Ms Mones worked part time, initially 9 hours per week on a Saturday. Her hours were later varied by agreement to 6 hours a week on a Friday. When the COVID-19 pandemic hit she was furloughed. The letter from her employer referred to the Coronavirus Job Retention Scheme (CJRS) and the fact that HMRC would cover 80% of her wages. However, as she was working Fridays plus other ad hoc hours, the letter stated that her wages would be calculated on the basis of average monthly earnings. She was paid thus from April to September 2020 when the business reopened. This resulted in a lower payment than if her pay had been calculated in accordance with the formula set out in the CJRS. Ms Mones claimed the difference by way of an unlawful deduction from wages claim. A tribunal dismissed her claim and she appealed.

EAT decision

The appeal was dismissed.

The Treasury Directions applied expressly to HMRC, making it responsible for the payment and management of amounts to be paid under the CJRS. While the CJRS provided qualifying employers with a grant to help them in paying their furloughed employees, nothing in any Treasury Direction expressly imposed upon an employer an obligation to adopt the CJRS or the formulae set out in it when calculating pay.

The CJRS detailed the obligations between employers and HMRC. It did not create any statutory or contractual obligation between the employer and its employees requiring it to calculate furlough payments in a certain way. Here there was an express contractual agreement reached between the employer and Ms Mones as to furlough pay which set out her entitlement. The CJRS did not affect that and impose any higher obligation.

At the end of the judgment, the EAT remarked that the position may have been different had there been no written agreement covering the calculation of furlough pay:

'Where an employer had chosen to furlough staff and claim reimbursement from HMRC under the CJRS, it might well be that an employee's contention for an implied term that his or her furlough pay would be calculated in accordance with the formula set out in the CJRS would have force. That would not be because the CJRS itself conferred a statutory or contractual right upon the employee but because, in default of the parties’ agreement to an alternative sum or methodology, a court or tribunal might accept that there had been a mutual intention to adopt the formula set out in the CJRS, as revised from time to time. That would be a fact-sensitive question and is not this case.’

Comment

Although cases in relation to furlough pay are unlikely to be commonplace, and it is hoped they will not be needed again for another generation, this case is helpful guidance on a situation where an employee agrees to payment in a particular way. In the same way that the employer could have agreed to pay more than the statutory scheme, here they agreed to slightly less and as long as the employer was not claiming back more than the 80% from the Treasury then this agreement could not be criticised.