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Sector Insights

Covid-19: Retail Sector

23.03.2020 Leisure, hospitality & retail

Laura Livingstone

Laura Livingstone Partner, Head of Employment

1) Can we use the Coronavirus Job Retention Scheme in order to temporarily close some stores?

Almost certainly yes.  The scheme is expressly stated to benefit employees “who would otherwise have been laid off”.  In employment law terms, a lay off is a temporary suspension of all work.  The scheme describes recipients of this benefit as ‘furloughed workers’.  Furlough is a word, hitherto largely fallen into disuse in the UK, but still commonly used in the United States, that means leave of absence.

Details are still being worked out at the time of writing, but under the outlines of the scheme, HMRC will reimburse 80% of furloughed workers (employees who would otherwise have been laid off)  wage costs, up to a cap of £2,500 per month, which it appears will mean them up to £2,500 of each furloughed worker’s wages. 

In summary employers will need to:

  • Identify and designate certain employees as potential ‘furloughed workers – i.e. workers who would otherwise have been asked to take some form of unpaid leave of absence;
  • Employers will then need to notify those employees of the proposed change in their status to furloughed workers.   The Government has specifically said that this scheme is subject to normal employment law rules – changing the status of employees is a matter of negotiation and agreement.  In the first instance the best way of achieving this is through consent – emailing employees and ask for their consent as an alterative to lay off, unpaid leave or even redundancy. Employers also need to be mindful of discrimination law if they are choosing within teams.
  • The detail has yet to emerge but employers will have to submit information to HMRC about the furloughed employees and what they are paid online through a portal that will be established at the Gov.uk portal.  We would imagine this portal will be rolled out in the next few days - this is a complex task.

Furloughed employees will not be able to do work for employers Detail is yet to arrive but we consider it likely that there will be penalties for employers who take advantage of the scheme and do not lay off/furlough employees by asking them to continue to perform work.  

2) Some of the stores have had a massive downturn on sales but we want to keep open. What other measures could I take to lower my wage bill in the short term?

Several measures an employer can consider to lower their wage bill include:

Unpaid Leave:

Employees' consent is required unless the employment contract (or collective agreement) contains a clause allowing the employer to place employees on unpaid leave. An employer may seek volunteers for unpaid leave.

Lay-off:

Laying off employees means that the employer provides employees with no work (and no pay) for a period while retaining them as employees. An employer must have a contractual right to lay off, and the contract should make clear that employees will not receive their normal salary during the lay-off period. If the contract does not give the employer the right to lay off, then any proposal to lay off will need to be the subject of consultation with employees, and will require employees' agreement. 

Employees may be entitled to a Statutory Guarantee Payment from the employer if you do not provide them with a full day’s work. However, this is limited to a maximum of five days in any period of three months. The maximum an employee can get is therefore £29 a day for 5 days in any 3-month period - so a maximum of £145.

The lay off period can last as long as the contract reasonably provides. However, if an employee is laid off either for four consecutive weeks – or for six weeks in a period of 13 weeks – the employee can give the employer written notice that he or she intends to claim a statutory redundancy payment.

Short time working:

Short-time working is a reduction in the hours that employees are required to work and (normally) a corresponding reduction in pay.

Employers must have a contractual right to put employees on short time, or seek express agreement to do so.

Other options:

After consultation and agreement with employees, an employer may agree with the employees a change the terms and conditions so that employees work reduced hours (at reduced pay) for a period.

An employer may consider if there are workers and contractors whose contracts can be terminated without the risk of an unfair dismissal or redundancy payment claim.

3) I have half my staff missing because they are self isolating for one reason or another. What steps could I take to keep the store running with a lower number of staff?

To ensure a minimum safe level of staff, retail employers may employ temporary cover, agree flexible working hours and consider working from home arrangements for duties, which may be able to be completed from home.

As a precautionary measure, an employer may consider dividing their workforce into two teams to work in the store on alternate weeks. The aim of this Rota is to protect all staff, by minimising the contact with other staff members and therefore reducing the risk for all should a suspected case of Covid-19 arise in a staff member.

Employers have a general duty to take reasonable measures to protect the health and safety of their employees. It is recommended that employers provide cleaning facilities, promote good hygiene and social distancing in the workplace, and keep up the date with the daily coronavirus advice issued by the Government.

4) We are thinking of moving staff to the more profitable stores from the one they are usually based. Can we do this?

An employment contract may contain what is often referred to as a mobility clause. A mobility clause permits the employer to relocate the employee to a different place of work (e.g. a more profitable store), perhaps within a limited area or anywhere within the UK. An employer should adhere to the implied term of trust and confidence as it may be implied to the effect that the employer must not exercise the mobility clause except in a manner, which renders its performance feasible.

In the absence of an express clause, an employee may, in certain circumstances, be held to have an implied duty of mobility. Otherwise, any proposal relocate staff will need to be the subject of consultation with employees, and will require employees' agreement.

5) What other government support is available?

Government guidance also provides details of support available to businesses including, an employer should be aware of potential support systems including:

  • statutory sick pay relief package for SMEs
  • a 12-month business rates holiday for all retail, hospitality and leisure businesses in England
  • small business grant funding of £10,000 for all business in receipt of small business rate relief or rural rate relief
  • grant funding of £25,000 for retail, hospitality and leisure businesses with property with a rateable value between £15,000 and £51,000
  • the Coronavirus Business Interruption Loan Scheme to support long-term viable businesses who may need to respond to cash-flow pressures by seeking additional finance

6) We have decided that it is necessary to make redundancies. Could this be isolated to a particular store to avoid the need for collective consultation?

An employer's obligation to consult collectively employee representatives is triggered where 20 or more redundancies are proposed at one 'establishment' within a period of 90 days or less.

Therefore, the duty of collective consultation will more likely be triggered if the 20 or more redundancies are only in one store rather than spread across multiple stores, as each separate store may amount to a separate 'establishment' for the purposes of the relevant legislation.

Absent any pre-existing arrangements, an employer's collective consultation obligations normally include making arrangements for the election of employee representatives, and consulting with those representatives about whether there are any:

  • alternatives to the proposed redundancies;
  • ways to mitigate the impact of the proposed redundancies on affected staff.

Subject to the “special circumstances” exemption detailed below, consultation should start in good time before any redundancies are confirmed. Any dismissals should not take effect until at least:

  • 30 days after an employer's consultation obligations have been triggered if between 20 and 99 redundancies are proposed.
  • 45 days after an employer's consultation obligations have been triggered, where 100 or more redundancies are proposed.

Failure to comply and “Special Circumstances”

Affected employees cannot block the redundancy programme from going ahead if an employer fails to comply with its obligations to collectively consult. However, the affected employees (or their representatives) can bring a claim for compensation of up to 90 days' (uncapped) pay each.

However, in the current extraordinary circumstances, employers have a defence to such a claim – the so called “special circumstances” defence which says that special circumstances which render it not reasonably practicable for the employer to comply with any of the collective consultation requirements, it shall take all such steps towards compliance with that requirement as are “reasonably practicable” in those circumstances. This defence is narrowly construed but if, as a result of restrictions on travel and similar, you cannot conduct a collective consultation you should seek to do what you can – conduct meetings by phone or by Skype for example. We would be happy to give you guidance on this difficult area should you wish.

Article authors:

Laura Livingstone