On 26 February 2021, the Department for Business, Energy & Industrial Strategy will close its consultation on “measures to reform post-termination non-compete clauses” in employment contracts.

Whilst covenants and the doctrine of the restraint of trade are hotly contested battle grounds in the UK Courts, the UK does not currently have any statutory provisions in place governing these clauses.  The consultation paper suggests this may change, and asks for views on two possible options, which could have serious repercussions for employers and employees alike.  In brief, these are:

 

  1. the need for an employer to continue paying an employee during the period of their post-termination restrictions for those restrictions to be enforceable; and
  2. more radically, banning any form of post-termination restrictions.

The second option seems unlikely to gain much traction, however, there is a possibility that the first might; especially as this mirrors the approach to covenants in some EU countries (perhaps an ironic change as Brexit looms).  The Government’s view on the option to pay employees during any restricted period is that this would “discourage widespread use of non-compete clauses by employers so that individuals have the freedom and flexibility to use their skills to drive our economic recovery”.  The consultation paper also suggests that a time limit on the length of non-competes is also being considered, and gives an example of six months.

Whilst this is not the first time the Government has asked for views on this topic, it will certainly be interesting to keep a close eye on the progression of this consultation.  With Brexit in the pipeline and the ongoing uncertainty that COVID brings, UK businesses will undoubtedly be looking at ways to ensure that their business continues to be as competitive as possible.  However, having to pay employees during any restrictive period could make the market even less competitive.  Whilst the biggest players in the market may have the means to protect their business relations and confidential information, smaller businesses could again lose out.

We will provide further updates once the outcome of consultation is known.

The COVID-19 pandemic has brought with it many challenges. One of the challenges faced by businesses has been how to work around the social distancing restrictions that have existed in various forms over the course of 2020. In this post we briefly explore one aspect of this – whether, and how, documents may be signed electronically.

Continue Reading Electronic signing in a COVID world and beyond

On 5 November, the Chancellor of the Exchequer, Rishi Sunak, announced that the Coronavirus Job Retention Scheme (“furlough scheme”) would be extended to 31 March 2021. On 11 November, HMRC provided updated guidance which sets out detailed information on the extended furlough scheme.

As outlined in our previous post, the furlough scheme will remain open for a further five months, until the end of March 2021. This means furlough will have been in place for a full 12 months by the end of the current extension. Under extended furlough, the Government will continue to pay 80% of wages up to £2,500 a month for those unable to work. All employers will have to pay for hours not worked are: (a) the cost of employer National Insurance Contributions; and (b) pension contributions. The extended furlough scheme will be reviewed in January 2021, to examine whether economic circumstances require employers to contribute.

We have outlined some key takeaways from the HMRC guidance below:

Who can employers claim for?

  • From 1 November, there is no longer a limit on the maximum number of employees that can be claimed for by an employer under the furlough scheme.
  • The guidance confirms that the extended furlough scheme is open for employees who were employed on 30 October 2020, as well as employees who were made redundant or stopped working on or after 23 September 2020 if they are then rehired.
  • Employers can furlough employees for any amount of time and work pattern, while still being able to claim the grant for the hours not worked.

Key dates to bear in mind

Employers should bear the following dates in mind when claiming through the extended furlough scheme:

      • The last date for submitting claims relating to periods up to and including 31 October 2020 is 30 November 2020.
      • The last date for submitting a claim for the period of November 2020 is 14 December 2020.
      • The last date to put in place a retrospective furlough agreement in order to backdate claims to 1 November 2020 is 13 November 2020.

The guidance provides a new monthly deadline for all claims going forward, which is 14 calendar days (or next working day) of the following calendar month, as outlined below:

Claim for furlough days in (month) Claim must be submitted by
November 2020 14 December 2020
December 2020 14 January 2021
January 2021 15 February 2021
February 2021 15 March 2021
March 2021 14 April 2021

Updated guidance on redundancy and termination

  • The purpose of the furlough scheme was to allow employers to maintain their workforce in the face of the operational impact of COVID-19. If redundancies are now made, these may well be subject to even greater scrutiny by employees in light of the extension of furlough. If redundancies are implemented nonetheless, it should be noted that the grant cannot be used for the purposes of redundancy payments.
  • The guidance confirms that employers can still claim under the scheme for a furloughed employee who is serving a statutory period of notice. This was the case under the pre-1 November 2020 regime.  It is not clear, however, whether employers can use furlough to cover contractual notice periods, and the guidance is contradictory on this point. It is hoped that the point will be clarified shortly.
  • In any case, the guidance notes that the government is in the process of reviewing whether statutory and contractual notice should be claimed under the scheme and will change the approach on this for claim periods starting on or after 1 December 2020. Further guidance on this point is expected in late-November, but it seems likely that employers will be unable to claim furlough for notice periods post-30 November 2020.

Holiday

  • Furloughed employees will continue to accrue leave as per their employment contract. This is payable at the normal rate of remuneration (i.e. their pre-furlough rates). Employers may, therefore, need to top up furlough pay for any holidays days taken.

Drafting issues to note

There are some potential inconsistencies in this guidance which should be noted:

  • In relation to TUPE, the guidance confirms that, for claim periods after 1 November 2020, a new employer is eligible to claim for TUPE transferred employees if the TUPE rules apply and the employees in question were employed by their old employer on or before 30 October 2020 and transferred to the new employer on or before 1 September 2020. At first glance, the 1 September date does not make sense, and it is more likely that this should have been drafted as 1 November 2020. Clarification is awaited.
  • The guidance on extended furlough confirms that an employee can be moved from sick leave onto furlough. The position on sickness appears to remain unchanged, in that employers have a degree of flexibility on deciding whether ill employees should be on sick leave (potentially being entitled to SSP) or on furlough and entitled to furlough pay. However, wording in the guidance suggests that sick furloughed employees can only continue to be furloughed if they have previously been placed on furlough before 30 June 2020 and a claim submitted by 31 July 2020. It is not clear if this is an error, as there is no requirement otherwise under the extended furlough scheme for employees to have already been furloughed.

The official government guidance can be found below; there are ten detailed documents in total:

If you require any further information on the above or have any furlough-related queries or concerns, please contact your usual Mayer Brown contact.

Further to our earlier post on the month-long extension of the Furlough Scheme until December (link below), Rishi Sunak has announced today (5 November 2020) that the Furlough Scheme will now be available for companies until next Spring.

The Government will continue to pay 80% of wages up to £2,500 a month for those unable to work until the end of March 2021, a year after it was first introduced.  All employers will have to pay for hours not worked are the cost of employer National Insurance Contributions and pension contributions.

The chancellor’s decision was based on “the need to give businesses and people security through the winter” in the face of significant uncertainty and a worsening economic backdrop caused by the effects of Covid-19.

The policy will be reviewed in January, where, depending on restrictions in place at the time, employers may be asked to contribute more.

Since the purpose of other Coronavirus Job Schemes was to encourage employees to keep staff in work post-Furlough Scheme, the Job Support Scheme referenced in previous blog posts has been postponed because of national developments related to the coronavirus pandemic.  Similarly, the Job Retention Bonus (JRB) will not be paid in February 2021 and a retention incentive will be deployed at the appropriate time.

We understand that HMRC will publish details of employers who make claims under the extended CJRS scheme, starting from December.  Full guidance with further details will be published by the government on 10 November 2020. 

(https://www.employerperspectives.com/2020/11/extension-of-the-furlough-scheme-update/?utm_source=Mayer+Brown+LLP+-+Employer+Perspectives&utm_campaign=99d16ebfeb-RSS_EMAIL_CAMPAIGN&utm_medium=email&utm_term=0_a032a20d3e-99d16ebfeb-80671743)

Furlough extended

As we wrote in our post on 22 October 2020, the Coronavirus Job Retention Scheme (“CJRS”), known as the furlough scheme, was due to end on 31 October 2020.  Its replacement – the Job Retention Scheme (“JSS”) – was due to come into effect on 1 November 2020.  However, on the day it was due to close, the UK Government announced that the furlough scheme would be extended.  The objective of the extension being to provide support to businesses and employees during the new national lockdown which began on 5 November 2020. The furlough scheme therefore remains available to businesses and is currently set to be open until December.

Level of support and other key points under extended furlough

The level of support available under the extended scheme mirrors that available under the CJRS in August, with the Government paying 80% of wages up to a cap of £2,500.  Employers must continue to pay employer National Insurance Contributions and pension contributions (which, for the average claim, amounts to 5% of total employment costs),  In addition, employers are still able to top up employee wages at their own expense if they wish.

It is worth noting that flexible furloughing is now allowed under the extended CJRS, as well as full-time furloughing,.  Employers therefore have greater freedom to make the CJRS work for their business needs during lockdown.  Employers need not have used the CJRS before now, and the scheme is open to all employers with a PAYE scheme and a UK bank account.  To be eligible for being furloughed under the extended furlough scheme, employees must have been on their employer’s PAYE payroll by 23:59 on 30 October 2020.  The employer must also have made a real time information submission to HMRC on or before 30 October 2020 in relation to the relevant employee(s).

Further details on the extended CJRS are expected shortly, so do watch this space for further updates.  Given the unpredictable nature of COVID-19, we believe that that the extension will be a welcome move for businesses in England impacted by the pandemic, in particular, the ability for furloughed staff to work on a part time basis.

What does this mean for employers?

However, the extension of furlough may have come too late to stave off job losses in some sectors.  A number of organisations will have implemented redundancies already, given the planned ending of furlough and the proposed introduction of JSS (which offers more limited support and is somewhat more complex). The Office for National Statistics recently reported that the number of redundancies and rate of unemployment are increasing, with the latter reported at 4.5% for those aged 16 and over.

Where redundancies are seen as the only solution, employers will clearly need to bear in mind their legal obligations, but should also take note of the principles set out in the joint statement from ACAS, CBI and TUC, in particular, with a view to conducting redundancy processes “openly; thoroughly; genuinely; fairly; and with dignity” [https://www.acas.org.uk/joint-statement-acas-cbi-tuc].  As businesses and employees look towards a potentially bleak winter it is important to remember there are alternatives to redundancies, including the use of the CJRS and, eventually, the JSS.  Employers may also want to consider other cost-saving measures available to them, such as changes to working patterns, and even pay.  In the current climate, being open and frank with employees about the challenges ahead and seeking their views could help in finding a way forward.

During the COVID-19 pandemic, data privacy – and, in particular, employee data privacy – has been at the forefront of employers’ minds. In the last six months, employers across the globe have been required to give careful thought to a whole host of potential issues, from contact tracing apps to temperature and other health checks in the workplace, as well as processing an increasing volume of health data of its staff.  Whilst not COVID-19 related, a recent decision from the Hamburg Commissioner for Data Protection and Freedom of Information in Germany (the “Commissioner“) is an important reminder of the very significant financial and reputational sanctions an employer may face if it does not appropriately collect, retain and protect employee personal data in line with GDPR.

Continue Reading

For more information about the topics raised in this Legal Update, please contact Oliver Yaros on +44 20 3130 3698, Miriam Bruce on +44 20 3130 3695, Francesca Ingham on +44 20 3130 3439, Vanessa Klesy on +49 69 7941 1283, or Ana Hadnes Bruder on +49 69 7941 1778. 

Learn more about our Cybersecurity & Data Privacy and Employment & Benefits practices.

A Legal and Practical Checklist for UK Employers whose staff wish to work from outside the UK

Since the Covid-19 pandemic began to impact working life in the UK in March 2020, the workplace has changed beyond recognition. In the UK, 60% of employees are now working from home (“WFH”) on a semi-permanent basis. Without the usual constraints of office working which WFH has brought with it, employers are being asked by employees (often those with family ties or homes abroad) whether they can work remotely from outside their usual “base jurisdiction”.

These requests can be costly for both employer and employee, with hidden pitfalls, especially in terms of tax that will be due. Understanding the requirements of the overseas jurisdiction will help you to decide whether to grant permission for the employee to work there and, if so, for how long and under what circumstances.

Before agreeing to such requests to work in an “overseas jurisdiction”, you should therefore consider the following main legal and practical issues.

Legal issues

  • Is the employee creating a legal presence in their overseas jurisdiction?

Check whether the individual would create a legal presence or permanent establishment in their overseas jurisdiction by choosing to base themselves there whilst working. What are the thresholds the employer needs to be aware of before triggering requirements to register a business and/or report or be liable for tax in the overseas jurisdiction?

  • Does the employee create a personal tax liability in the overseas jurisdiction?

In some overseas jurisdictions, you will need to deduct taxes from an employee’s wages (e.g. under a Pay As You Go or Pay As You Earn requirement). You will need to be aware of any obligations to deduct taxes from wages and how that arrangement may be implemented in any country where an employee chooses to base themselves. Whilst the employer might take the view that a personal tax problem is not their problem, most will want to avoid an employee getting themselves into difficulty, and the employer is likely to be better placed to identify any tax snags. Accordingly, it is important to check any thresholds for triggering the application of the tax regime in the overseas jurisdiction. For example, in some overseas jurisdictions, personal tax liability is triggered if the employee has been in the jurisdiction for more than 183 days. In working out this threshold, account for any periods of personal or holiday time the employee may have spent in the overseas jurisdiction in addition to working time.

  • Will mandatory employment protections apply?

Check the threshold for when an employee working in an overseas jurisdiction starts to benefit from the applicable local mandatory employment protections. These could include minimum rates of pay, paid annual holidays, anti-discrimination rights and protections on termination. This could materially alter the terms of the employment contract. For example, it is very likely that restrictive covenants which are valid in one country could be hopeless if left unchanged for an employee basing themselves in a different country.

  • Will the employer need to comply with regulatory and compliance obligations in the overseas jurisdiction?

For regulated sector companies (e.g. financial institutions), consider whether the individual will be performing any regulated activities in the overseas jurisdiction for which you (and possibly the employee) will need to comply with local regulatory and compliance requirements. Check whether you need to obtain licensing or approval for both the employer and the employee from the local regulators.

  • Which workplace Health & Safety rules apply?

The duty on UK employers to protect employees’ health, safety and welfare includes providing a safe working environment when staff are working from home. For individuals working in an overseas jurisdiction, check for any additional local health and safety requirements.

Remember that employees will also need to comply with applicable public health guidance (such as quarantine periods) both in the overseas jurisdiction and on their return to the base jurisdiction.

Practical issues

  • Will time differences disrupt efficient running of the business?

This may seem an obvious point, but check whether the time zones will interfere with the efficient running of the team and business. Is the individual part of a team that works closely with clients in another time zone? If so, communicate clearly with the employee what the expectations are in terms of their hours.

  • Do you need to document agreed changes and/or amend the contract of employment?

As mentioned in the above point, clear communication is crucial. It will be important to manage the individual’s expectations to reduce the chance of a subsequent dispute and also to maintain good employee relations. Depending on the circumstances and the arrangement reached with the employee, consider whether you should document any amendment to the contract of employment in writing.

If there are parameters that the employee needs to abide by (e.g. not staying longer than a certain period or not engaging in any particular activities whilst in the overseas jurisdiction), these should be documented.

  • Is the job really one where the employee is never required to come into the office?

In practice, we think it is important for the employer to distinguish between two situations. First, there could be a short-term move to another country during the pandemic for family reasons, but where the employee is intending to come back to the base country again when the pandemic is over. Here, the parties should document the shared understanding and a time period for the revised operation to run. It may also be necessary to consider whether the individual will necessarily be allowed to return to the base country, if they originally had to rely on a visa or work permit. The second situation would be a permanent move to another country with no anticipated end in sight. Here, the parties need to be clear about what will happen if the arrangement is found not to be working. Is the job in question one which never requires attendance in the base country offices for meetings or training or collaborative meetings? If the employee attends the base country irregularly at the request of the employer, who pays for that travel? Will the employer be happy paying salary at the same level if the employee has moved to a much less expensive part of the world? All of these issues need to be sorted out well in advance of any move happening.

  • Make sure staff do not take matters into their own hands.

It is extremely important that employers make clear to staff that they are not authorised to work outside their base country without prior authorisation for anything more than a week or two. We have heard of a number of cases where employees have moved countries, often to be with family during lockdown, without telling the employer or seeking permission. In view of the significant issues for both employer and employee, this is dangerous practice, and it is likely that both employer and employee are going to pay a penalty, one way or another.

(Article on this topic for Hong Kong employers: https://www.mayerbrown.com/en/perspectives-events/publications/2020/09/what-a-hong-kong-employer-should-consider-before-agreeing-to-an-employee-working-remotely-from-overseas)

HM Treasury has just announced a change to the Job Support Scheme which comes into force from 1 November for the whole of the UK. Previously, employees had to be working 33% of their hours to qualify, with the employer then picking up 33% of the cost of the unworked hours, and the Government paying the remaining 33%.

Now, employees can qualify for the scheme if they work only 20% of their normal hours.  For unworked hours, employers will now only need to contribute 5%, and the government will pick up the remaining 61.67% of the cost.   That means that if someone was being paid £587 for their unworked hours, the government would be contributing £543 of the cost and their employer only £44.

Employers using the scheme will also be able to claim the Job Retention Bonus (£1,000 per employee) for each employee meeting the eligibility requirements of that scheme.

With a second wave of the COVID-19 pandemic seemingly well underway and restrictions tightening across the country, it is without doubt that remote working will continue to be the norm for many employees for the foreseeable future. The potential issues this raises for employers in relation to data security and the protection of confidential information were brought into focus last week, with the Financial Conduct Authority’s Director of Market Oversight, Julia Hoggett, warning banks that their security arrangements for staff privy to insider information should be the same whether those staff are working remotely or from the office, highlighting the difficulties in ensuring insider information is kept from partners or flatmates, and the risk of use of privately owned devices where employees’ activities cannot be recorded.

While Ms Hoggett’s comments related to the increased risks of insider trading posed by remote working, they act as a reminder to employers of the increased risks posed by the current situation in relation to protecting confidential and/or sensitive information generally. Employers should consider updating their policies regarding the protection of confidential information to ensure that they are appropriate in the current climate, and ensure that staff are: (i) aware of them; and (ii) have received appropriate training on the increased risks to confidential information when working from home.

You can read Ms Hoggett’s speech at the City Financial Global event in full at https://www.fca.org.uk/news/speeches/market-abuse-coronavirus.

 

Our UK Pensions group are delighted to share details of this year’s annual forum. Usually a half-day event, this year we are trying a different format and running the in-person conference as a virtual series of weekly webinars taking place through the autumn.

If you and your colleagues are free, we’d be delighted if you’d join us as we explore current and upcoming pensions related matters that we anticipate will be at the forefront of trustees’ minds. Speakers include leading Mayer Brown lawyers, and guest speakers: Erik Davey, Director at SECOR Asset Management; Richard Farr, Managing Director at Lincoln Pensions; and Rory Murphy, Trustee Chair.

Webinars will take place at the same time each week, 10:00 a.m. BST/GMT on Thursday’s, from 15 October through to 26 November. Further details on each topic are available through the links provided:

To attend any or all of these webinars, please register here.

If you have any questions related to the series, we invite you to share these with us in advance so that we can address these during the webinars. Please send your questions to: LON-Events@mayerbrown.com.