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The CJRS was announced by the Chancellor of the Exchequer on 20 March 2020 and since then we have had 3 versions of the Government Guidance on the Scheme, including the latest over the Easter weekend.This guidance sets out, in broad terms, the outline of the Scheme, but there is no legislation or detail of the legal structure. It is against this unusual background that the High Court has given the first legal decision on the Scheme.The decision was also unusual as it followed a remote video hearing that took place over several days.
The Administrators of the company that ran the Carluccio’s chain of 70 restaurants asked the court’s determination on a number of questions regarding the furloughing of around 2,000 employees. All of the branches had been closed since March as part of the Government’s strategy for controlling the Coronavirus outbreak. An administration order was made on 30 March and the Administrators needed to make their decisions in relation to the employees within 14 days, so by Easter Monday, 13 April.The Administrators wanted to retain the staff and furlough them rather than make them redundant, but only if and in so far as the costs of doing so would be met by the Government under the Scheme and they do not incur any greater liabilities for the insolvent company.
The Administrators had sent a letter to the employees offering furlough by paying 80% of their salary but limited to the sum received from the Government. Some employees accepted, some indicated that they would prefer to be made redundant and some had not responded.
Mr Justice Snowden gave what he described as “..a view of legal issues to assist the Administrators.” He said that the letter had validly amended the contracts of employment of those employees who had expressly agreed to it.Those employees’ contracts will be adopted by the Administrators when they apply for payment under the CJRS. Payments will be made to those employees using the monies received from the CJRS, so the funds will not fall into the company’s general funds for distribution.
Snowden J rejected the argument that the contracts of those who had yet to respond had been varied, but if they do belatedly respond then they will be in the same position as the consenting employees.The unvaried contracts of non-responders would not be treated as adopted at the end of the 14 day period, so the administrators would not have to dismiss those employees in order to avoid priority liabilities towards them.
This is no doubt the first of many cases concerning the CJRS, which is evolving on a virtually daily basis.
For more information on the issues covered in this article, please get in touch with our Commercial Dispute Resolution team by calling 01484 821 500 or email firstname.lastname@example.org to speak to a member of the team.
April 15, 2020
Hilary is a Solicitor and Partner in our Commercial Dispute Resolution team.