Skip to main content
Article

How can law firms mitigate risk when considering the furlough scheme

Financial, Executive and Professional Risks (FINEX)
COVID 19 Coronavirus

By John Hosie | May 27, 2020

On 20th March 2020 the UK Chancellor announced the introduction of the Coronavirus: Job Retention Scheme (the Scheme) to assist businesses during the pandemic1.

Applications to the Scheme opened on 20th April 2020 and in the first half an hour employers had made 67,000 job claims2. As the impact of the lockdown continues it seems likely that more firms will chose to utilise the relief that the Scheme provides.

Naturally firms have been actively looking at cost savings, which has included utilising the scheme to furlough some of their staff. However, in doing so they may not yet have fully considered the risks associated with furloughing their staff and the means of mitigating those risks.

There is no criticism of firms for these actions within this article, equally this article is not focused on the employment rights of furloughed employees or the process of furloughing staff, but instead considers the actions that may be needed to mitigate some of the risks whilst staff are on furlough.

Furloughed staff cannot do any work

The rules of the Scheme are clear, that once staff are on furlough they cannot work for their employer including undertaking any work that makes money for their organisation or provides a service for the employer or an associated employer3.

It is easy to see a scenario where a furloughed employee sends a quick response to an email, or updates and moves on a matter that they have been working on. However, in doing so this may prevent the employer being able to claim reimbursement under the Scheme for that employee. More significant perhaps is the question as to whether the firm’s professional indemnity insurance covers them for advice or work provided by furloughed staff.

It is worth stating here that we do not know how underwriters would respond in such a scenario, but it is equally worth stating that being the test case is best avoided.

Mitigating the risk

It is suggested that the following actions are considered: -

  • Provide clarity to furloughed staff on what is expected of them, specifically that they cannot undertake any work
  • Explain to furloughed staff how changes to the furlough arrangements will be communicated, ideally to prevent furloughed staff casually checking work emails and then replying to more substantive matters

A more robust and effective approach may include: -

  • Temporarily remove access to IT systems and emails as you would for someone who has left employment or was on garden leave
  • Run regular reports to ensure that furloughed employees have not attempted to access IT systems, replied to emails etc.
  • Circulating details of who has been placed on furlough internally. This has the dual impact of alerting anyone to any emails or work undertaken when the employee is on furlough, as well as potentially alerting staff internally if cyber criminals have compromised that account.

Disgruntled employees

There is a further consideration around limiting access to systems and emails for furloughed employees. Some employees may be disgruntled about being furloughed and may look to cause the organisation harm. The recent Supreme Court Case WM Morrisons Supermarkets plc (Appellant) v Various Claimants (Respondent)4 evidences the dangers of how disgruntled employees may act and highlights the need to consider the level of access to data that should or should not exist, for all staff.

Conclusion

It would seem the status of furloughed employees is broadly equivalent to being placed on garden leave. This is a concept that businesses may be more familiar with and may have existing processes in place that can be amended. Even if you have already furloughed employees it is hoped that the thoughts and suggestions in this article may prove useful retrospectively to further assist in protecting your business.


Footnotes

1 https://www.gov.uk/government/speeches/the-chancellor-rishi-sunak-provides-an-updated-statement-on-coronavirus

2 https://www.bbc.co.uk/news/business-52346685

3 https://www.gov.uk/guidance/check-if-you-could-be-covered-by-the-coronavirus-job-retention-scheme#while-youre-on-furlough

4 https://www.supremecourt.uk/cases/uksc-2018-0213.html

Author

Lead Associate - Finex PI UK Legal Services

Contact Us

Related Solutions