Employer Entitled to Depart From Treasury Direction Method of Calculating Furlough Pay
In this case, the Employment Appeal Tribunal (EAT) confirmed that the Coronavirus Job Retention Scheme (CJRS) Treasury Directions did not have contractual or statutory effect.
Background of the Case
In the case of Mones v Lisa Franklin Ltd, the claimant, Ms Mones, was employed by Lisa Franklin Ltd as a part-time receptionist. In March 2020, as a result of the COVID-19 pandemic, Ms Mones was furloughed. Her employer, Lisa Franklin Ltd, wrote to her in order to set out her furlough pay and how this would be calculated.
It emerged that the calculation method set out in the employer's letter was different to the formula contained in the Treasury Directions governing the CJRS. Had the employer followed the formula set out in the Treasury Direction, Ms Mones would have received a higher amount of furlough pay.
The claimant brought an unlawful deduction from wages claim at the Employment Tribunal. The Tribunal rejected the claim and the claimant appealed to the EAT.
EAT Finds No Unlawful Deductions of Wages
The EAT rejected the appeal. The Treasury Directions applied to HMRC and set out the grant that would be paid to qualifying employers in respect of furlough pay. The Treasury Directions did not create obligations on employers to adopt their specific formulae in pay calculations. The Treasury Directions did not have statutory or contractual effect and the question of the amount to be paid to any individual employee was a matter to be agreed between the parties. In Ms Mones' case, the letter she had received setting out her pay arrangements during furlough had contractual effect. There had therefore been no unlawful deductions from her wages.
The EAT did observe that the outcome of the case might have been different had there not been an express agreement between Ms Mones and her employer, governing her pay arrangements during furlough. Had there been no such agreement, it might have been possible for Ms Mones to argue that there was an implied term that the employer would calculate furlough pay in accordance with the formula set out within the Treasury Directions.
What Can Be Learnt From This Case?
This case acts as a reminder of the importance of employers keeping furlough pay records. HMRC can request to see these for up to six years, and it may also be necessary to qualify pay information for the purposes of an employer's annual audit.
