Understanding of the extent of the Covid-19 risk to BAME colleagues is evolving – what does that mean for NHS employers?

On Tuesday 23rd June, partner Emma Digby was in conversation with Steve Hamstead and Mark Smith from AON along with Ward Hadaway commercial lawyer Nathan Bilton in a webinar titled Can trade credit insurance help to keep the supply chain moving?

The insurance market is under untold pressure as a result of the pandemic, and in such times there is a risk that insurers will cancel or reduce credit lines, particularly in certain high risk sectors such as retail. However the Government has stepped in to effectively underwrite the existing trade credit insurance agreements, and to keep trade supplies moving. Will this be enough?

In this webinar, we discussed:

• the Government backed scheme and how it will operate
• the prospects of obtaining insurance going forward, and whether it will become too cost prohibitive
• could the new legislation put your business at risk and jeopardise your insurance cover if you cannot cancel a contract when you are not getting paid for your goods or services
• the Brexit effect, and how this will affect the insurance market
• protecting your business with proper risk assessment processes and paperwork

A reduction in hours or salary or changes to hours or patterns of work is a contractual change – you can’t just impose it without significant risk. The same applies for lay-off or short-time working where there is no existing contractual right to impose these.

In summary, the process that an employer should follow to implement these measures is as follows:

1. Communicate the Company’s position clearly and the urgent need to achieve temporary cost-saving to ensure the ongoing financial viability of the organisation
2. Explain the proposed changes in detail and seek the employee’s agreement, and
3. Record the agreed changes in a letter which is counter-signed by the employee.

If employees will not agree then employers will be at substantial risk of claims for unlawful deduction of wages, breach of contract and/or constructive unfair dismissal if they seek to impose these changes unilaterally. Employers should be mindful that this approach is likely to cause significant employee relations issues and dissatisfaction if only some employees agree to a reduction in pay. Employers should have a clear strategy for what their approach will be if this is the case – for example, they may wish to instead explore a different measure such as redundancies. This may form part of the employer’s communication when explaining the reason for the changes and seeking the employee’s agreement.

Unions: Employers should also be aware that where there is a recognised trade union in respect of any part of the workforce which is being asked to agree to a change to terms and conditions, the recognition agreement or collective agreement will require the employer to consult and/or negotiate with the trade union in the first instance.

Collective consultation: Where 20 or more dismissals are proposed at one establishment in any 90-day period, there are stringent collective consultation rules which apply (regardless of whether the employees have two years’ service or not). All dismissals count towards this total unless the dismissal is “not related to the individual concerned” – therefore dismissals for things such as conduct or capability do not count, but most other dismissals will count. This will include where you are imposing changes to the contract such as reduced hours or pay.

The rules on collective consultation set out a prescriptive and time-consuming process which must be followed, and minimum timescales before any redundancies can take effect. The cost of any claims relating to failure to follow collective consultation requirements are substantial, and specific advice should therefore always be sought before seeking to implement collective redundancies. We will be publishing further guidance on this on the Hub shortly.

Our advice to you here is simple. It will depend on the circumstances surrounding your debt but for the most part, unless it is crystal clear that there has been a debt outstanding long before Covid-19 and there was an inability to pay prior to the Covid situation we would recommend that you hold off issuing any further petitions until after the 31st December. Unless the criteria set out above is met, a judge is likely to exercise their discretion leniently and could dismiss the petition. This could also lead to cost consequences which would adversely affect you.

We are happy to discuss individual cases to assist creditors at this difficult time, however, generally any cases proceeding to petition would be the exception as opposed to the rule. Even if presenting a winding up petition is not available for now, there may still be other forms of legal proceedings that you can use to collect money owed to you, like county court proceedings.

On 4 May 2020, the Government launched the Bounce Back Loan Scheme (BBLS), which is intended to cut red tape to enable smaller businesses to access finance quickly during the coronavirus outbreak.

The scheme helps small and medium-sized businesses to borrow between £2,000 and up to 25% of their turnover. The maximum loan available is £50,000.

The government guarantees 100% of the loan and there are no any fees or interest to pay for the first 12 months. After 12 months the interest rate will be 2.5% a year.

The length of the loan is 6 years, but it can be repaid early without penalty. No repayments will be due during the first 12 months.

Under the scheme, lenders are not permitted to take any form of personal guarantee or take recovery action over a borrower’s personal assets (such as their main home or personal vehicle).

Businesses can apply for a BBLS loan if it:

• is based in the UK
• was established before 1 March 2020, and
• has been adversely impacted by the coronavirus.

Any business regarded as being a business in difficulty on 31 December 2019 will need to confirm that it is complying with additional state aid restrictions.

Businesses from any sector can apply, except the following:

• banks, insurers and reinsurers (but not insurance brokers)
• public-sector bodies, and
• state-funded primary and secondary schools.

Businesses already claiming under the following schemes cannot apply although it is possible to convert an existing loan under such schemes into BBLS:

• Coronavirus Business Interruption Loan Scheme (CBILS)
• Coronavirus Large Business Interruption Loan Scheme (CLBILS)
• COVID-19 Corporate Financing Facility.

There are 11 lenders participating in the scheme including many of the main retail banks, which are listed on the British Business Bank’s website (www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-schemes/bounce-back-loans/for-businesses-and-advisors/). Applicants are directed to approach a suitable lender via the lender’s website. If an applicant is declined by a lender, they can apply to other lenders in the scheme.

The lender will ask applicants to fill in a short online application form and self-declare that they are eligible. All lending decisions remain fully delegated to the accredited lenders.

The parties to litigation should still take the steps they have been ordered to take and comply with any Orders made by the court. If for any reason it looks as if a direction cannot be complied with because of the Covid-19 virus then an extension of time can be agreed with the other party (up to 28 days) or through the court. We are aware that Orders have been made extending the time for certain steps to be taken by 56 days.