Furlough fraud: What happens if an employer forces staff to work while furloughed?

June 19, 2020

 

With the news that HMRC has received over 3,000 reports of “furlough fraud” since the start of the Coronavirus Job Retention Scheme (CJRS), Owen John explores the issues around employees working while furloughed and the risks employers face in this area.

What work can employees do while on furlough?

At present, furloughed employees are not entitled to do any work for their employer or for another associated business – this is a condition of their employer being able to reclaim 80% of their salary through the CJRS. Employees can, however, work for a different employer.

Employees are entitled to volunteer in the community as long as they are not creating revenue or providing a service for their own employer. Employees on furlough can also undertake training, provided the training is both directly relevant to the employee’s employment and agreed between the employee and employer prior to being undertaken.

From 1 July, the new “flexible furlough scheme” will be in place, which will allow furloughed employees to return to work on a part-time basis until the CJRS comes to an end on 31 October 2020. For the hours of the week when they are still designated as on furlough, however, they will still not be able to perform any work for their employer.

What can the employer claim back under the CJRS?

Claims can only be made in respect of expenditure incurred, or to be incurred, by an employer. Until the end of July 2020, employers can claim up to the lower of 80% of usual monthly wage costs or £2,500 per employee, plus the associated employer national insurance contributions and employer pension contributions on the capped furlough pay.

In calculating the employee’s reference salary, only regular salary or wages are taken into account. Non-monetary benefits, including taxable benefits in kind, should not be included in the reference salary.

The amounts claimable through the CJRS will start to decrease from 1 August 2020 until the CJRS ends on 31 October 2020.

What risks do employers who break the rules face?

If an employer requires an employee to undertake work whilst being on furlough leave, but continues to claim their salary from HMRC under the CJRS, the employer will be at risk of committing fraud and can expect an investigation by HMRC. It is likely that employers who are found to have claimed fraudulently under the CJRS will be required to repay the monies back to HMRC. In addition, if they have done so deliberately, they may face criminal penalties including a potential prison sentence.

What can an employee do if their employer doesn’t pass on the reimbursement to them?

HMRC CJRS guidance states that employers must pay the employee all the grant they receive for the employee’s gross pay in the form of money. An employer cannot enter into any transaction with an employee which reduces the amount they receive. If an employer does not pass on all of the reimbursement to the employee, the employee will have the option to report the matter to HMRC, and will have a potential claim for unlawful deduction of wages or breach of contract (which could also lead to a constructive unfair dismissal claim) under employment laws. Any information reported to HMRC will be treated confidentially and reporting is anonymous.

What rights do employees have if they are punished for refusing to work or speaking out about their employers breaking the rules?

An employee who refuses to work while furloughed and speaks up to their employer about their wrongdoing in abusing the CJRS is likely be protected from detriment under whistleblowing laws, as such conduct could amount to raising a “protected disclosure”. This means that if they are punished or dismissed for speaking out, they could bring a claim for automatic unfair dismissal.

Similarly, an employee who blows the whistle to HMRC on their employers’ deliberate conduct of abusing the CJRS is also likely to be protected by employment law. The employee or the “whistleblower” will again be protected if, because of their protected disclosure to their employer or to HMRC, they are either dismissed or suffer detrimental treatment.

Should you wish to discuss any of the above, please do not hesitate to get in touch:

 

 

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