Furlough: Do you need the Employee's Written Agreement?

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Does an employer need an employee's written agreement to doing no work under their employment contract before they can make a valid claim under the Coronavirus Job Retention Scheme?

Why are some people saying that the Employee's written agreement is needed?

The Treasury's Direction to HMRC, which is the legislative source of HMRC's power to make payments under the CJRS, says so. Paragraph 6.7 provides an employer can only reclaim the employee's salary, amongst other things,:

"...if the employer and employee have agreed in writing (which may be in an electronic form such as an email) that the employee will cease all work in relation to their employment."

Well, that's pretty clear. So what's the contrary argument?

Simple. There have now been six iterations of the HMRC Guidance, four of which predated the Treasury Direction. The first iteration simply required the employer to notify the employee in writing that they had to stop work (but did not require the employee to agree anything, and certainly not in writing). The second to fifth iterations added a requirement that the employer keep a copy of that written notification for five years but, again, said nothing about written agreement.

The sixth iteration, issued yesterday, states:-

"To be eligible for the grant employers must confirm in writing to their employee confirming that they have been furloughed. If this is done in a way that is consistent with employment law, that consent is valid for the purposes of claiming the CJRS. There needs to be a written record, but the employee does not have to provide a written response. A record of this communication must be kept for five years." (emphasis added)

So, they're totally inconsistent. Which should we follow?

Technically, the Direction trumps the Guidance.

But the Guidance shows the way that HMRC intends to interpret and apply the Direction. Significantly, this sixth iteration was published three days after the Direction was issued. It is a clear and unequivocal statement, intended for employers to rely upon, indicating that HMRC will not require evidence of the employee agreeing in writing to stay at home in order to allow a claim under the CJRS.

Could HMRC renege on what it has repeatedly said, and refuse to pay out to employers who cannot supply an employee's written agreement to ceasing all work for the employer? If it did, it would be extremely vulnerable to a judicial review claim; see here. The re-issue of the Guidance, subsequent to the publication of the Direction, which flatly contradicts the Direction, would make HMRC's position very difficult if it subsequently sought to resile from its Guidance to Employers.

So, what's the answer?

Don't panic. HMRC seems to be quite happy to accept claims for reimbursement of 80% of salary without requiring evidence of the employee's written agreement. It is unlikely to change its approach. Some employers have been contacting employees, asking them to sign further documents. That can cause other problems. Sometimes, it's best not to poke the bear.

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