High Court clarifies how administrators should utilise JRS for furloughed employees

By James McAllister

- Last updated on GMT

High Court clarifies how administrators should utilise Coronavirus JRS for furloughed employees

Related tags: Coronavirus, Job Retention Scheme, Administration, High court ruling

A landmark High Court order has provided further clarity regarding how administrators should utilise the Government’s Coronavirus Job Retention Scheme (JRS) for employees whose employer has entered insolvency proceedings.

The legal clarification was made in relation to those employed by Italian chain Carluccio’s, which fell into administration last month​ with Geoff Rowley and Phil Reynolds of FRP appointed as joint administrators.

Government guidance related to the JRS states: “Where a company is being taken under the management of an administrator, the administrator will be able to access the Job Retention Scheme. However, we would expect an administrator would only access the scheme if there is a reasonable likelihood of rehiring the workers.”

Employees for Carluccio’s had reportedly been sent a letter from administrators offering to continue to employ them on varied terms so that they could take advantage of the JRS. 

However, some had not responded to the letter, leading to concerns those employees would have to be made redundant.

Under normal insolvency rules, administrators have to dismiss workers within 14 days of their appointment in order to avoid liability for their employment and wages.

However, in the absence of Government guidance on the issue, the High Court ruled it was in the interest of the company and its employees to allow the administrators to extend this 14-day period.

The decision allows staff who have not yet agreed to the changes in their contract extra time to consent, so they can then be furloughed under the scheme.

FRP has described the order as being one of real significance to any business in administration, or likely to enter administration with employees furloughed. 

“This provides valuable breathing space to administrators in the unprecedented circumstances created by Covid-19,” it says. 

“It may help save jobs that would otherwise be lost.”

Trade union Unite says the ruling provides the blueprint for administrators to make use of the JRS to protect jobs during the Coronavirus crisis.

“This important decision ensures that no one is left behind in a hospitality sector reeling from the effects of the shutdown,” says Howard Beckett, Unite’s assistant general secretary for political and legal affairs. 

“It is now essential that all those Carluccio's workers who have either not received a letter or not responded to the letter from the administrator get in touch with their union, Unite, or the administrator immediately to ensure they are not dismissed and lose out on the opportunity that this court judgement has ensured.”

Related topics: Business

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