Failure to provide Furlough Agreement can be costly
This week I’m looking at a situation, which I suspect is typical of thousands of workers across the country, and is demonstrated in the case of Ms Zahra Motahar-Talemi v The Park Hotel Ayrshire Limited
Back in March 2020 when the word ‘furlough’ found its way into our daily lives, employers were thrown a lifeline in an attempt to retain workers who would otherwise be dismissed. First came full-time furlough and then flexible furlough, and the scheme has undoubtedly been a success despite the eye watering cost to the national purse of £70 billion.
At the start, the government committed to paying 80% of employees’ wages up to a cap of £2.5k per month. As time went on the percentage of furlough pay committed by the government reduced periodically until 30 September 2021 when the scheme ended.
From a legal perspective an employer had to obtain permission to reduce employees pay to 80% and I, like many others, spent a very busy week or two drafting ‘Furlough Agreements’ for clients. This is because section 13 of the Employment Rights Act 1996 provides:
13 Right not to suffer unauthorised deductions.
(1) An employer shall not make a deduction from wages of a worker employed by him unless—
(a) the deduction is required or authorised to be made by virtue of a statutory provision or a relevant provision of the worker’s contract, or
(b) the worker has previously signified in writing his agreement or consent to the making of the deduction.
In a nutshell, what section 13 means is that an employer cannot make a deduction from pay unless it is contractually entitled to do so, or alternatively the worker has previously given permission in writing. So if an employer wished to reduce a workers pay by any amount; unless they have that written permission the deduction is unlawful, and this is what happened in this case.
Ms Motahar-Talemi claimed the The Park Hotel had not sought written permission to reduce her pay by 20%. She had not agreed to go on furlough. This was not disputed by the hotel manager.
What was in dispute was whether she was employed on a 35 hour week contract. The hotel claimed she wasn’t, she claimed she was. The tribunal held she was which meant all calculations were based on those hours.
The law is on her side and she was entitled to be paid in full. Employment Judge, Alan Strain said:
“No written contract or statutory enactment permitted the respondent to make deductions from the claimant’s pay. No consent had been obtained from the claimant to the deductions. Whilst the Tribunal understands and appreciates the unique circumstances that prevailed due to the pandemic in the end of the day the respondent did not obtain the claimant’s consent to the furlough leave and she is accordingly due her full pay for the period under deduction of the payments received”.
During the furlough period she received gross wages of £3,154.75. She ought to have received £7,594.30. Therefore she suffered a deduction of £4,439.55.
She received an additional £374 because her holiday entitlement should have been based on 35 hours at 100% pay and £524.65 to reflect the loss of pension contributions.
This is a stark reminder to employers, who placed staff on furlough and reduced their pay without written permission, that they may face a section 13 for an unlawful deduction from pay claim anytime soon.
One more thing. . .
Agreement cannot be given retrospectively, it must be provided in writing before the deduction is made.1