Can furloughed employees carry out work for another business during furlough?

If suppliers still wish to terminate the contract, they must contact the directors or the officeholder dealing with the insolvency process and obtain their approval to terminate the contract – which, of course, might not be given.

If the continued obligation under the contract to supply goods/services to the customer would place the supplier in financial hardship the supplier can apply to court for permission to terminate the contract.  This will involve time and legal expense.

In practice this means that any risk assessment will need to be reviewed constantly and adjusted as our understanding of the nature and level of the risk grows.

Some service-providers are instigating special Oversight Groups to keep this issue under review but engagement and consultation with those affected is critical and making sure they feel confident to raise concerns and refuse to work if they believe they are not safe.

The Cabinet Office has published a helpful Procurement Policy Note (“PPN”) on relief available to suppliers due to Covid-19 (available here). This can include making advance payments to suppliers, if necessary. The PPN sets out actions that public sector bodies should take (until at least 30 June 2020) to ensure continuity of service and to ensure that its suppliers can resume normal contract activity once able to.

The actions public sector bodies should be taking include:

• Informing its suppliers (that they believe are at risk) that they will continue to be paid as normal until the end of June 2020 (even if service delivery is currently interrupted). Risk might include supply chains collapsing and/or significant financial implications for a supplier
• If a contract involves a payment by results mechanism, basing payments on previous months (e.g. the average monthly payment over the previous 3 months), and
• Ensuring that invoices submitted by suppliers are paid immediately to maintain cash flow in the supply chain and help to protect jobs.

If you are a supplier to a public sector body, you must act transparently and on an open-book basis, making cost data available to your public sector clients. You must also continue to pay your employees and subcontractors / suppliers. Suppliers to the public sector must not expect to make profits on any undelivered elements of a contract. The PPN makes clear that, should suppliers be found to be taking undue advantage, or failing to act transparently, a public sector body can take action to recover payments made to that supplier.

The PPN requires public sector bodies to urgently review their contract portfolios and take steps to support suppliers who they believe are “at risk”. However, no definition of “at risk” is given in the document.  We would suggest that if you are a supplier and you have yet to hear from a public sector client, you should seek to get in touch with them as soon as possible, particularly if you have concerns about your supply chain, staff retention and/or are experiencing financial difficulties currently. Given the requirement for transparency, you may be required to provide evidence, so it may be helpful to have any relevant documentation ready to send, if necessary, as this may help ensure a decision is made by the public sector client more promptly, particularly as the public sector body may have a number of contracts to consider.

The FCA’s test case in the Supreme Court ruled overwhelmingly in favour of policyholders.  However, business interruption cover generally has the prerequisite of physical damage or loss to the property (or in some circumstances, the presence of a notifiable disease at the property or within a certain radius of it), to recover losses caused by the interruption to your business. The onus is on insurers to re-assess those claims which are impacted by the Supreme Court’s judgment and to make contact with the policyholders regarding next steps. If you have not already made a claim, in the first instance the terms of any policy should be checked carefully to see whether business interruption cover is provided.

You can rotate staff on furlough or flexible furlough.

One option is to make it clear in the letter agreeing to being furloughed that there is an open ended right to rotate and to be able to take them off furlough and bring them back and put them back on.

So the employer reserves the ability to rotate by building into the agreement, but only exercises it if it is permissible.

Rotation is quite key for employers who need to make a temporary reduction to their overheads but want to retain the skills base to call back when work picks up. Having furloughed staff return on a part-time basis may reduce the need to rotate.

It also helps in the employer being able to show that they are treating the workforce as fairly as possible and everyone is taking a reduction. Get in touch if you need help preparing the documentation for furlough that will permit rotation or flexible furlough.

Read more about flexible furlough and how this can be used as part of the CJRS.