Legal

When should employers repay furlough grants?

29 Jul 2020 By Sungjin Park

With some firms choosing to give back their job retention scheme payments amid reputational risk, Sungjin Park explains what organisations should consider  

As a consequence of the Covid-19 pandemic, the government's furlough scheme was introduced, which is expected to cost more than £54bn by October 2020. While the scheme has seen the government offering billions to companies to avoid redundancies, most recently, companies including Bunzl, Ikea and The Spectator are actually choosing to fully repay their furlough grants. This comes after businesses faced scrutiny for claiming furlough for low-paid employees and calls for more corporate transparency among businesses, particularly following the Black Lives Matter protests, putting increased reputational pressure on companies. 

Another example of businesses being put under the spotlight is the government's bid to make companies publish workplace risk assessments. The question for employers is what can they do to ensure they are balancing reputational issues with their legal obligations? 

While the majority of companies were entitled to claim furlough under the scheme, it seems reputational and moral pressure has been at the forefront. The grant was evidently vital for some businesses and allowed them to continue trading at a time they might otherwise not have been able to. However, this has called into question what is socially acceptable and what falls within the law. For some businesses, they simply cannot afford to return the grant and so may look at other ways to demonstrate ethical practices and transparency.

Corporate transparency

An example of corporate transparency that is being urged in recent weeks is diversity and inclusion, sparked by the recent Black Lives Matter protests. Many businesses have sought to demonstrate diversity and inclusion, for example, by conducting surveys and diversity audits. This, however, has implications with respect to data protection laws and companies need to ensure that, when doing so, they are complying with the strict rules on collecting, processing and publishing personal data. It is important for businesses to remember that strict rules apply to all data, including sensitive data. This is in addition to the laws on protected characteristics such as race, gender, sexual orientation and beliefs. Therefore companies need to be extra careful, regardless of whether their intentions are good.

Another example is workplace risk assessments, with the government urging companies to publish such assessments online. It will clearly be important for businesses to reassure their employees and the public that safety is a top priority. While health and safety is a legal duty, there is no such duty to publish any risk assessment. This again comes down to social pressure and reputation and, if companies decide to publish, they need to draft it carefully to ensure the message is properly portrayed. For example, people will want to know they are safe but they do not need to know the details of how the assessment was conducted.

What we may see is these two areas joining together to create a new area of health monitoring. Companies are understandably keen to keep track of employees’ health, and may look to implement track and trace apps. The Information Commissioner's Office has also acknowledged that there may be a need to collect this information to protect workers and others. However, this will still fall under data protection laws, meaning that companies need to demonstrate it is both necessary and proportionate. 

With a trend towards greater transparency, there will be challenges facing companies relating to balancing legal duties with reputation management and protection of employees. However, it is important that employers ensure any steps they do take do not conflict with existing strict laws. 

Sungjin Park is a knowledge lawyer in the employment practice at Addleshaw Goddard

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