Legal implications of COVID-19 on your UK business

Emma Jalolen: Hello, hopefully you can all hear me, this is Emma Jalolen from the Finnish British Chamber of Commerce on behalf of ourselves the Norwegian Chamber of Commerce and the Danish UK Association I would like to welcome you all to this webinar, on the legal implications of COVID-19 on your UK business hosted together with our member Gowling WLG. 

We will be doing a Q&A at the end so during the presentations please feel free to ask your questions. First off, we will have Jonathan Chamberlain from Gowling WLG covering the topic "how UK employers can deal with the special circumstances" next up we will have Amber Strickland talking about how employers can discharge their duties to protect the health and safety of employees who are working from home and those who cannot work from home and then finally we will have Julian Pallet talking about director's duties in these testing times.

Now I am hoping most of our attendees will have joined us so I will pass on the mic to Jonathan to start us off.

Jonathan Chamberlain: Thank you! I will just give it a second for my slide, my one and only slide you will be pleased to hear, to load, good, I am going to be talking about three things about the scheme, what are the basics, I suspect that you will be familiar with those by now but I think it is worth just recapping so we know what it is we are talking about.

Then we are going to move on to what are the key things that you as an employer need to do to take advantage of this scheme and then, let's talk about the issue that we as a law firm are seeing coming out of this in practice and since it has been announced I can say that this is about 70%25 of the work that the team here are doing is around queries coming out of this scheme and the reason for that going back to the first point and looking at the basics is this, we are all looking at this from the perspective of our employees, what does it mean for them, really what this is a tax reimbursement scheme or a rebate scheme effectively.

What the Government have announced is how employers can claim money from the Government and what they can claim. They have largely left silent as to what then happens to employees save that, any money that you claim from the Government has to have been spent on employees, it has to be a wash through, you are not going to take a cut on the way through but other than that what actually happens to employees in all of this have been left to the basics of the existing law and not the new scheme.

The second point that I want to make is that we are all working off HMRC guidance, the rules haven't been published yet so we do not know what the fine points of detail of this scheme are going to be, we can see the direction of travel, we can see what the guidance says, we think it is going to be very difficult for HMRC in the months weeks to come when hopefully all this has passed and businesses are still claiming money back from the Government for HMRC to say well you are not having it because of this small print in the regulations, if that contradicts the guidance we are rather expecting the Courts to take a view that look you have told business you are going to get this money they are going to get this money, but it does mean that quite a bit of the detail, even of the reimbursement element of the scheme hasn't yet been worked out.

So with those two points in mind what does the scheme actually involve, well the outline I think is now very well-known because the headline point is that the Government will reimburse employers up to 80%25 of an employee's remuneration - we will come back to in a moment how you calculate what their remuneration is - up to a monthly maximum of £2,500 plus employer's national insurance contributions plus the minimum pension contributions under auto-enrolment, so 80%25 or £2,500 whichever is the lower and that is a number that has obviously been calculated to cover most of the income for most of the workforce of the UK, it's obviously not going to compensate higher earners but your average Joe is going to see most of their income preserved by virtue of this scheme, if they are in work.

Of course that brings me to the next point about the basics, this of course applies to people who are in work, there is a separate scheme for the self-employed which interestingly is not in some aspects nearly as generous but we are not talking about that today. The reason why it is for those in work is, it comes back to what I was saying about this being run through HMRC and through the tax system, essentially if you have got a PAYE code for somebody then they qualify as an employee under this scheme, they are not really concerned with the difference between employees and workers and all that sort of stuff, those employment classification issues, if there is a PAYE code you can claim and if there is not then you may not be able to, probably cannot the only reason I am sounding hesitant is that as we will see when we talk about issues coming out in practice, we have been asked questions about secondments and things like that which I will touch on at the end.

So if that is what the fundamental structure looks like then what are the key things that employers must do to take advantage of the scheme? Well lets step back a moment here if we can, remember what I said that this scheme is primarily about issues between or money flowing from Government to the employer, it is largely left unsaid what happens to the relationship between employer and employee, so we have been positioning furlough in terms that this is good news, you know you might otherwise be made redundant, but you can go on this thing called furlough and you will keep 80%25 of your income up the cap etc. Well just imagine how if in normal circumstances you were going to the employee and you were going to say actually you are now only going to be paid 80%25 of your income up to the cap and you are not going to have any work to do, now we would all recognise that immediately as giving the employees certain rights, you say to somebody you are only going to get 80%25 of your pay, they can walk or if they stay they can bring claims for breach of contract or more likely in this scenario unlawful reduction from wages and they can just sit and wait whilst those unlawful reductions rack up and at the end when we are all going back to work normally, god willing 3 months, 4 months, 5 months however long it takes, then they will just put in their claim form and say given me my back wages now please. Which means that the key thing that you have to do here to take advantage of this scheme is get the agreement of the employee, I mean first, you should check their contracts to see whether you have got the right to do this but unless you are a large manufacturing company whose roots go back to the 1960s and 70s and that's when you first started drafting your contracts of employment, I can pretty much guarantee that you will not have that right because lay-off and big manufacturers would do that if there is a downturn in orders then people would be laid off from the production line but we haven't seen that sort of thing being written in contracts for 30 years or more, there are some historic ones where it still continues but I will eat my hat if it is in the contracts of many of the people who are listening here today.

So that means that you need to reach agreement with the employee. Now in most cases when it is clear that the alternative to this is redundancy then what is going to happen is that you are going to get acceptances but that is not guaranteed so one of the things that, for example has been in the news recently is that British Airways is putting 30,000 on furlough but it has reached a separate deal with its pilots that they are going to be kept on 50%25 of their pay and that is their actual pay not the capped amount.

So that is an example of an employer topping up the scheme and we know from our earlier webinar that we did on this in the week when we did a survey of those attending that a sizeable proportion, not the majority by any means still a minority but a sizeable proportion of employers are planning on topping up these payments to the actual amount presumably to make it easier for employees to agree to going.

If you cannot get agreement and it's a question of either you go on furlough or we make you redundant and you want to put people compulsory on furlough then you would be looking at going through a similar exercise you would to a redundancy which means choosing the right people, going through a process of consultation now clearly in current circumstances you could accelerate that but the basic requirements still remain so that is something you will need to think very carefully about, so if I said what are the two key things that are the real take aways from this is consult with your workforce about what it is that you are doing and then when you have got the agreement of individual employees make sure that you document it, okay because if later down the line, at the moment HMRC are saying we are going to give you lots of money, here you are have lots of money and everybody is thinking this is a scheme to keep the economy going and HMRC are going to be generous and that's great, I do not trust the tax man as far as I can spit and I just think that by the time this all settles down they might be looking to try and get out of some of the payments so let us make sure that the agreement is documented that you can say to HMRC this employee was on furlough, we were not paying them except furlough money and crucially and this is a crucial point they were not doing any work for us NONE, nadda, nothing. 

So that brings me on to my third point, what issues are we seeing here coming out in practice. Well, let us start with that one, can employees do any work whilst they are on furlough, no, not for you they cannot, they can be in the loop as far as workplace communications are concerned and that is a question we have been asked you know we sent our emails to our people, can we still keep them on the list, can we let them know what is happening, yes you can, what you cannot do is oblige them to look at them. You cannot oblige them to do anything, if they choose to look at them that is fine that is their business but it is a matter of choice for them and again that is something that you should document in your furlough agreement, we will be sending you communications to keep in touch but you are not obliged to look at them so it is quite clear that they are not being kept on standby so that they can be recalled in.

Another thing that is coming out can you furlough people part time, you know we want to put people on just working in the mornings or just working in the afternoons, can we claim for the rest of their remuneration and that answer to that is no, once people are on furlough they cannot do any work for you furlough has to be full time as far as the hours they work for you are concerned, what you can do we think, is rotate, so a period of furlough has to be a minimum of three weeks so it seems to us that there is no reason in principal why you cannot if you wanted if you have still got operations ongoing say okay this group of employees you are on furlough now for these three weeks and then you will come back to work for three whilst another group goes on furlough, so you could do that you could rotate on a three week basis but you cannot do it part time.

Another issue, can employees do any work during this period, well as I say it is absolutely clear that they cannot do work for you it is not so clear that they cannot do work for anyone else, it looks like under the guidance that that is permitted but the position may change when the regulations are actually published, we just do not know so we are advising people to be cautious about this, again I come back to the furlough agreement, you should say in there you cannot work for anybody else without telling us and us giving your our permission and you coming back to work when we ask you to come back to work.

So we had a situation where an airport contacted us and they said well there are lots of people that we do not need because there aren't any flights coming but the local police would really like to employee them because they have all had the relevant criminal records database check so they are easily employable by the police, is it a problem if we go and let them work for the police and we took the pragmatic view well this is a socially good thing, but make sure there is a clause in the furlough agreement that if the regulations say this cannot happen then you can put a stop to it then and you are in quite a strong position then to argue with HMRC over any monies that have already been paid so just be careful around that I think is what we would say but clearly if people are given the chance of a delivery job or a supermarket job or please an NHS job then we do not really want to stop them from taking it if we can avoid it.

Then I think the last point that I want to touch on for my slot is what should we be paying people because a lot of people's remuneration rate varies so what are we talking about 80%25 of what, and it is very clear that it is 80%25 of what you were paying them on 28 February because that is the cut-off date for this scheme.  That when if somebody was in employment on that date they can be furloughed even if you subsequently made them redundant because of COVID-19 and now this has come in you can hire them back and then furlough them straight away, what you cannot do is rehire somebody which is where the issue around secondments has come because people are saying we have got people overseas and we want to bring them back because there is no work for them there but if you do that then they come back onto your payroll quite possibly and once they have got a new PAYE code says after 28 February you are not going to be able to claim for them so they may have to furlough in the countries that they are in but what remuneration they get is what they were getting on 28 February if that is variable then you average it out over the previous 12 months if they were with you for 12 months or if they only joined you since the beginning of February say then you probably could over that period.

So those are some of the issues that are coming out of this but when we did a webinar on this earlier this week and we did a whole webinar on this job retention furlough scheme we had 140 questions from delegates now we were able to group those but even so it is impossible to deal with everything that is coming up in this whistle stop tour but I hope that gives you an outline and highlights some of the main things and if there is one take away that I want to leave you with here it is this, get your furlough agreements properly drafted, reviewed and make them as watertight as possible. Thanks.

Amber Strickland: Thanks Jonathan so just moving on to the next part of the webinar which relates to health and safety so in these unprecedented circumstances there will be a number of legal and practical issues for businesses to deal with, Jonathan has just gone through one of the biggest ones at the moment but health and safety of employees should remain a top priority, how employers treat their employees now will have a lasting impact on morale and loyalty amongst the workforce and it could also impact on the brand image. This section of the webinar focusses on the employers health and safety duty to those employees who suddenly find themselves working from home for a long period of time or those who are unable to work from home and are still required to attend at their place of work, I will consider some of the practical steps employers should be taking to ensure that they discharge their duties and the adjustment which employers can make to keep their employees safe in light of the increased risk to both physical and mental health.

So what are employers required to do? This is the legal bit so bear with me, employers have a duty to protect the health safety and welfare of their employees and other people who may be affected by their business, these duties are enshrined in legislation and in common law, failure to discharge these duties could lead to, among other things, criminal prosecution or a civil claim by employees, so in practice this means employers making sure that their employees and others who are affected by their business in some way are protected from anything that may cause harm, they must do whatever is reasonably practicable to achieve this. In reality there is nothing special about COVID-19 it is just a risk that now exists, the legal duty in this respect is exactly the same as it was before, employers have a duty to do a risk assessment in relation to each of the activities that employees undertake and that risk assessment needs to cover the additional risk associated with COVID-19, employers still have a duty to ensure so far as is reasonably practicable that employees are not exposed to the risks associated with COVID-19, these risk assessments should be kept under review as the position changes.

So how can employers discharge their duties when employees are working from home, employers may well have identified that there is a risk of catching the illness when commuting into the office and when coming into close contact with colleagues in the office and as such they may have asked their office based employees to work from home and indeed the UK Government guidance now requires that those who can work from home do work from home.

However, changing the way that employees work because of the COVID-19 risk will introduce new risks which were not there before so for example, prolonged periods of working from home could introduce risk of work related upper limb disorders, the working from home activities need to be assessed in the same way as other work related activities so as a minimum employers should carry out a risk assessment to identify what could cause injury or illness from employees working from home that is the hazard, decide how likely it is that someone could be harmed and how seriously that is the risk and then take action to eliminate the hazard or if this is not possible to control the risk, the employer does not have to attend each employees home to carry out the initial risk assessment and any follow up risk assessment required, instead the risk assessment can be conducted by the employee from home, a home working risk assessment should check whether the home worker's place of work is suitable.

Much work carried out at home is going to be low risk office type work so any risk assessment will need to be tailored accordingly. It will need to consider things like whether the employee has enough light to work and the temperature of the room, whether the employee is set up on a flat surface with sufficient space to work comfortably, whether the fire alarm or smoke detector is working correctly and whether flammable materials are being kept near an ignition source, whether the home sockets and electrics are in good working order, if employees are using electrical equipment provided by the employer as part of their work the employer is responsible for its maintenance, employees should check company equipment regularly to ensure that it is safe for use, i.e. it doesn't have any obvious defects and that it is kept in a safe condition that will not cause any harm to employees or others.

Finally the employer's policy on VDU use when the employee is working from home. Actions which can be taken to eliminate certain hazards or at least reduce the risk include ensuring that employees know to take regular breaks and giving them the opportunities to do so, for those at risk of experiencing muscular pains ensuring that support equipment is provided like wrist support and if there is only one suitable workspace in the home and more than one person using it the employee should be encouraged to use that workspace and employers should consider speaking to them about how they can adapt their day to day tasks to accommodate this.

So what about those who cannot work from home? Not all employees will be able to work from home because of the nature of their job, they might be working on a food production line or as part of an essential supply chain. If this is the case, in addition to the usual risk assessment which is being conducted in order to assess the risks in the workplace employers will need to consider adapting their policies and procedures to incorporate increased control measures to deal with the risks of COVID-19.

The measures which employers take will depend on the risks identified but they might include providing extra PPE, ensuring that employees are working two meters apart where possible, temperature checking employees on arrival at the workplace, making sure employees avoid non-essential travel, avoiding large meetings and relying on vid con and other technology, allowing employees to stagger commuting times if possible, this may mean shifting working hours to start or end either earlier or later than usual to avoid the busiest and most crowded times on public transport.

Keep in mind though that the changes which are made might introduce new risks which were not there before, like if employees are required to keep two meters apart can they still do their job safely, especially if this requires being close together to, for example, lift or manoeuvre machinery or heavy objects, as always keep these risk assessments under review and update them if anything changes in line with Government advice and changes in the situation.

So what about the mental wellbeing of your employees, employers also have a duty to protect employees physical and mental health, your updated risk assessments will most likely have highlighted risks to employees mental health arising out of these extraordinary circumstances, working from home whilst also looking after children of school age or working from home with other householders who are doing the same, working from home alone and/or working from home with far too much to do or too little to keep the employee occupied.

Normal routines will likely no longer exist and employees may find that the boundaries between work-life and home-life are already non-existent giving a whole new meaning to the challenges of achieving work-life balance. The reality is that these factors together with the feelings of isolation and anxiety and distractions of what is happening globally which may well ensue are likely to have a negative impact on employees mental health and productivity. For those employees who are not able to work from home they may be facing other strains on their mental health like increased worry about their or their family's safety. Employers also need to take steps to identify the hazards and manage the risks as far as is reasonably practicable.

Communication at this time will be key, employers should keep employees up to date on how the situation is impacting the business and how they are taking steps to manage the situation, it should be consistent, honest and as clear as possible. Ideally there would be a central hub where information and tips on wellbeing and staying connected are stored and a point of contact who employees can approach if they have any concerns.

Aside from formal comms also do not forget to encourage speaking in general, in the office we might chat while we are making a cup of tea or just whilst walking past a colleague, we cannot replicate that so easily in the world of social distancing but a call to someone who you haven't spoken to for a while may go a long way. Remember also that one size does not fit all and what works for one employee may not work for another. Risk assessments should identify individual needs. It can be as straight forward as line managers or supervisors speaking with employees about how they are feeling, what their needs are and what the employer can do to help.

You should also identify and protect those that are most at risk, some employees will find these circumstances more difficult than others. These include employees who are new to the business, those employees who are not used to working from home, employees who used to have a thriving social life with their colleagues and otherwise and employees who live alone. Some employees may not have easy access to suitable equipment or a good environment to work from home, special care should be taken to consider and address as far as is reasonably practicable the concerns of this kind of employee.

Finally, I thought it would be helpful to let you know some of the practical ways that we at Gowling have been trying to look after each other's mental health, we do not have time to go through all of these but specific examples are, our team leaders have been telling stories of what has gone well and what has been going not so well in the brave new world, stories about dogs and children going crazy during conference calls can help to boost confidence of juniors, reduce feelings of isolation and normalise problems as much as possible so that we feel like we are all in the same boat.

We have provided employees with practical tips about relevant issues like how to manage anxiety, how to stay active and tactics to promote healthy sleep. There are plenty of blogs and videos about these on the internet. We have also set up pastoral sub-teams and buddy systems so that employees are being contacted regularly by managers or their peers for a quick chat and to share any problems.  So in summary really the overall position is that you need to continue with your risk assessments in light of the new risks of COVID-19 and you need to keep these risk assessments up to date taking into account the physical and mental implications of this new risk. So just to pass on to Julian now.

Julian Pallett: Thank you Amber, good afternoon everybody, I am sitting here thinking that I am probably sitting in a bad posture, in bad light, feeling very lonely so it is a very strange time. I am going to take this afternoon about duties of directors in the UK. Healthcare workers on the front line at the moment fighting COVID-19 but directors have got an equally important task and that is keeping the wheels turning and helping to minimise the damage to the economy, the livelihoods of their employees and also try to keep otherwise viable businesses intact for when the crisis passes.

Directors in the UK have a wide range of duties under statues and regulation and Amber and Jonathan have talked about some of those already but of course directors also have statutory duties and common law duties in their capacity as officers of the company and in particular they have a general duty to promote the success of the company for the benefit of its members generally but they also have to look at a non-exhaustive list of other matters including the long term consequences of their decisions and the interest of the company's employees and its commercial business relationships, its suppliers, its customers, its creditors.

Directors therefore are going to have to perform a very difficult balancing act between the short term decisions they need to protect the business including perhaps prioritising critical payments over non-essential ones, protecting the workforce, at least may have potentially a short term impact on the company's financial and trading position. The point that directors need to be aware of is that in addition to those obligations where the solvency of the company is in doubt, where there is a risk of insolvency in terms either of the company having a shortfall of assets against liabilities or more likely in the short term simply not being able to pay its debts as they fall due the directors also have an additional supervening obligation to look after the interests of creditors. Now you may have heard that the government announced very recently at the weekend that they are planning to suspend the rules relating to wrongful trading in the UK and also be bring in some form of moratorium to help with creditor pressure.

On the suspension of wrongful trading that is obviously helpful because in the UK we have a principle that if the directors of a company continue to trade beyond the point where they knew or ought to have known that the company has no reasonable prospects to avoid the insolvency then if they continue to trade and incur credit they may be subsequently found to be personally liable for that additional credit. Now under the new rules announced by the government and this is going to be backdated to 1 March the principle is going to be that wrongful trading itself will not apply so directors may be able to carry on trading even where it could well be said and probably is the case for very many companies and they are either insolvent now or very likely to become insolvent so it does help directors in the decision to continue trading. However, and this is the but, and it is a big but, all the other rules about trading while insolvent remain in place so fraudulent trading where directors incur credit actually knowing that it will not be repaid or recklessly without any regard to whether it can be repaid, that is fraudulent trading and directors may be personally liable and indeed potentially criminal liable for that. Also rules about transactions at an undervalue, selling assets at an undervalue to connected parties, preferring one creditor over the other, all those rules would still apply and so directors still need to be very careful in discharging their duties in these difficult times and the changes announced do not completely remove all the obligations directors have to creditors.

With regards to the proposed moratorium we do not know any detail yet like much what the government is doing they are doing it in a very fast moving environment, not by making it up as they go along but certainly trying to adapt as things develop and so what they are taking about are two types of moratorium.

The first is a general moratorium through a very formal scheme which has been talked about for some time and they are talking about bringing this forward. Now we do not yet know when they will be able to do this because of course Parliament is not going to be sitting and secondly because there is a procedural aspect to us we do not yet know how many companies will be able to take advantage of this.

The other is a specific COVID-19 moratorium which will be far more process light if you like, it will be far easier to bring into play and this will provide some protection to companies from creditor pressure without the need to go into a formal insolvency process and although we have heard of a few high level cases obviously Laura Ashley, Flybe the regional airline and companies like that which have gone into formal administration, probably because of COVID but there are other reasons as well almost certainly we are not anticipating that vast numbers of companies are going to go into formal insolvency procedures immediately more likely they are going to try and mothball, they are going to try and close down their operations, they are going to try and furlough their staff but in some way they are going try and survive, they are going to try and avoid an insolvency process and be ready to start trading again once things start to improve and so these moratorium procedures may help but we do not know the detail yet.

So what can directors do, what are they things that directors need to focus on in the meantime to make sure they do discharge their duties properly and it is very important that they do this because clearly at the moment everybody is trying to do their best in very difficult very fast moving circumstances but when the dust settles after all of this people will be looking back to see what people have done, to see whether they have abused the situation and certainly there will be some fraud, there will be some really bad behaviour around and those directors will be brought to book. But if directors act reasonably and prudently in the current circumstances and so their honest best to abide by their duties and to fulfil their duties it is very unlikely the Courts are going to be receptive to any attempt to criticise or penalise honest, hardworking directors who have done their best in the circumstances.

So some practical things which directors should focus on. First of all, good governance. Hold regular board meetings and have collective decision making because it will tend to lead to better decisions. Do not treat this as a formality, it is a valuable process. Base your decisions on factual evidence on up to date forecasts and keep reviewing the position. Circumstances are changing very fact, none of us thought three weeks ago we would be in this position I am sure and so keep reviewing your decisions in the light of changing circumstances.

Directors need to be aware of the available support so things like the furlough scheme, VAT and tax deferrals that are available and the business loans which may be available supported by the government, now there is a lot of doubt as to whether they are comprehensive, whether they are going to be available to companies on terms they can take advantage of but certainly directors need to be aware of all these things and look to take advantage of those things which are appropriate for their business to help the business continue or at least to put it in a position where it can stand still and await the end of the current situation.

One thing directors do need to do is to engage with other stakeholders, with suppliers, with creditors, with customers, with pension trustees if you have got pension liabilities and other stakeholders in the business.

At this stage the government has not apart from one or two exceptions around rental property, protecting people from eviction things like that, they are not yet intervening in private contractual arrangements and Jonathan has already mentioned that the furlough scheme does not override basic employment law principles so where directors need to reach accommodation with people, maybe to defer payments, to defer rent payments for example or to delay deliveries, things of this nature, they do need to engage with the other stakeholders because in many cases those stakeholders will have a mutual interest or at least some mutuality of interest in reaching some kind of agreed way forward because for many of those stakeholders the failure of your business will be a disaster as well.

Insurance, make sure you know where you are with your insurance including your directors and officers insurance both in terms of any claims you may be able to make, that it covers any of the losses you are suffering but also to make sure that you keep the right level of insurance in place and protect your business and your employers. And then finally audit trail, keep a record, keep minutes of your meetings, keep records of the decisions you make and the reasons why you have taken those decisions and the facts you have taken into account in doing so.

All this will help you should it be necessary at a later date to demonstrate why you did what you did, why what you did was a reasonable, honest and prudent thing for a director to do and that should help protect against any criticism in the future. And then finally, and you might say I would say this would not I, do take professional advice whether that is from lawyers or whether it is from accountants or any other relevant professionals because in discharging your duties as directors taking and acting on proper professional advice is the right thing to be doing and will help you demonstrate that you have done and you have tried to do the right thing in very difficult circumstances.

Looking forward and we are going to have a lot of challenges even when we come out of this so do keep reviewing things and starting to plan ahead so far as you can. Do remember that if you defer creditors, if you defer rent or VAT or PAYE you will have to pay that so there will be a wave of creditors to be met with an increased level of working capital needed in the business both for meeting those deferred creditors but also to finance any improved trading once things start to get back to normal and bear in mind that when we come out of this a lot of businesses will be stressed, a lot of businesses will be risking over trading and so you may have increased risk of your counterparties, so people you trade with, bailing on you so you need to factor that into your risk planning as well.

Also rebuilding relationships, a lot of relationships will be strained during this period so start to think about how you will rebuild relationships in the new world going forward because that will be the key to transitioning out of the current crisis.  Do not make assumptions, keep checking what you think is going on with the facts as they present themselves because at the moment the one thing we know is any assumptions we make are likely to prove to be incorrect. I am sure there will be some opportunities coming out of all this so good luck and I hope this has helped give some kind of route map on what you should be doing in the current circumstances.

Emma: Right thank you so much Jonathan, Amber and Julian for your presentations. Hopefully everybody has really enjoyed. We have got a few questions that have come in. Just as a reminder to all the attendees if you have any questions please write them in the Q&A box at the bottom of your screen, not in the chat box. I saw at least one question come in through the chat box so if could just copy paste that into the Q&A so we can go through them all. But let us just get into the questions, so the first one that we have got is: Can directors be furloughed and if so how are they supposed to comply with fulfilling their directorial duties if they are not supposed to work to benefit the business during the furlough time?

Jonathan: Right I will pick that one to start and then perhaps Julian can comment. The general view is that directors who are employees can be furloughed as employees but to the extent they need to exercise their directorial duties, now I think this is one which is clearly open to abuse in the sense that if a director continues to do pretty much everything they were doing before then query the extent to which they can split out their employee and director role but in terms of complying for example with the duties that Julian has just set out then there is no reason at all why they cannot be furloughed as employees, continue to take their cash and deal with the issues that they have got to deal with because otherwise Julian as you have made it clear bad things might happen.

Julian: Yes thank you Jonathan. I think it is absolutely right that you need to be very clear that under English law directors of companies wear two hats, one is an officer of the company and that is where their directors' duties arise and the other is as an employee so even if on furlough as an employee directors still have to discharge their duties as officers.

Now in practice that is likely to give rise to quite a few problems and it may well be that for many businesses they will need to find a way of paying their directors to carry on working as employees as well as directors and officers because the things they will need to do to keep the systems running and to look after the employees, the customers, suppliers, the creditors, may take more than just simply discharging their statutory duties and that is one of the things directors of companies will need to think about is who the directors need to carry on being employed and not furloughed in order to keep the business together and if so how much should they be paid and that will depend partly on what the business can afford, so yes be very clear about the fact that there are different duties for directors as officer and the things they do as employees.

Emma: Thanks and the next question came in directly for Jonathan and it was: Can you recall people on furlough early and if yes what are the implications on that to the employee vis a vis HMRC/government furlough agreement.

Jonathan: Well this goes back to what I was saying about making sure that you got this buttoned down in your furlough agreement with the employee. You can recall people on furlough early but bear in mind that furlough has to be for the minimum of three weeks so if you are recalling them from under that period then you are unlikely to be able to claim back from the government for any of it, it will not count as a furlough. Once you have gone after the three weeks then you can call them back without affecting your compensation payment but make sure that you have agreed with the employee that that is what you can do, otherwise you might find employees who are spending their time in different parts of the country who will not be able to get into work etc. etc. so you will want to have sorted that out before the whole thing starts.

Emma: Okay thanks and next up we had: Can a director be criticised under insolvency legislation for refusing to take up a loan under the government scheme if she or he does not want to give a personal guarantee to the bank to support the loan, i.e. can she or he put his or her interests in front of the company's interests?

Julian: Well thank you that is a very good question and there are a lot of big questions around the government loan schemes but on this particular one there has been a lot of talk in the press about this. I do not think the government intended that people should give personal guarantees and of course they have specifically provided that the banks cannot ask for security over the director's own homes, their private residences although by taking a personal guarantee of course a bank could indirectly get to the director's home because the director might need to sell their home to pay off a personal guarantee. The short answer to this very good question is no, a director does not have to give a personal guarantee and if the condition of the loan is that they give a personal guarantee they cannot be criticised for not doing it because they have no obligation under English law to put their personal assets on the line to support the business.

The other things is I think directors need to think about when looking at these loans is not only do they have to give a personal guarantee but can the business afford it because of course these are not grants they are loans and basically the government is inviting, with its support, inviting directors to borrow money to cover losses caused by COVID and then repay it out of future profits so some big companies may be able to afford that but a lot of small companies may well say actually we are never going to be able to afford repay this loan even though it is guaranteed by the government it will be a liability of the company and therefore we shouldn't be taking this loan for these purposes because the company cannot sustain it and actually it is not a discharge of directors' duties to take a loan they cannot see any prospect of being able to repay. And the other extreme of course small businesses may say well even if we think we might be able to repay this over the next few years why should we bother, why should we work for the next few years to pay off a loan that has been taken out due to circumstances outside our control and I think these are very good questions and illustrates some of the problems that why in the heart of what the government is trying to do in trying to protect the economy and get find ways of making business pay the cost of doing so, so there are some big issues here.

Emma: Thank you for that answer and the next one I think I missed just before was, I think it came in during Jonathan's presentation and it was: Are you saying that workers can get paid work elsewhere during furlough or are you talking about furloughed workers doing unpaid, i.e. voluntary work for the NHS or the Police.

Jonathan: There is no issue there as far the Job Retention Scheme is concerned. HMRC do not mind if employees are doing voluntary work. As far as the position is between employer and employee again I come back to the furlough agreement. If it is okay for your employees to volunteer then you should say so but also make it clear that you can call them back if that is what you are anticipate that you are going to need to do so that your employees have not make commitments elsewhere that it would be both practically and legally difficult to ask them to break.

As far as paid work is concerned it is absolutely clear you cannot be paid work for the employer during furlough, it is not clear whether you can do paid work for someone else. It does not appear to be expressly prohibited in the guidance although there is an ambiguity there and that is why our advice is the starting point should be for employer on furlough is you cannot work for anybody else, if you wanted to work for anybody else you need to ask us and get our consent and we need to be able to call you back and employers can take a view on that on a case by case basis of how much risk they are willing to bear. The example I gave of the airport where it was quite clear that it is an advantage to society at the moment if employees who are already checked for criminal records can go and work for the Police who are short of people working for them at the moment. So that employer we are encouraging to take a view in those particular circumstances but other employers will take different views.

Emma: Alright thank you and the next one is a bit of a longer question: As a small independent school kindergarten and crèche the early years setting is open to all but we have furloughed all our staff as we are closed. We have school staff who would like on a completely voluntary basis contact their children by agreed emails and contacts. They want to choose if and when and likewise it would be voluntary from the children's point of view as we are not charging fees. Is this allowed under furlough as it would definitely not be generating any revenue but would it be classes as providing a service, this would be to the children rather than a service to the business?

Jonathan: You know how it is said that any lawyer can answer any question with the words "it depends", as a lawyer you have to be careful of that you know you ask the question does my bum look big in this and if you reply it depends… I want to try to answer this question without starting off "it depends". The principle is that they cannot do any work for you the kindergarten, however if it looks like that work is carrying on by other means so they are in fact working with the children but being paid privately then I can see that HMRC might look to challenge that because really what has gone on here is in effect the kindergarten acting simply as an agency for the introduction of the provision of the teaching services to the children. Now clearly if the kindergarten is not making any money out of that then that is quite a hard one for the revenue to book but where you have got the owners of the kindergarten who will also be doing this then it is doing to get a bit tricky.

What I would not want to say because it would be a harsh thing to say particularly in a kindergarten context where children are in isolation and this is difficult enough for them to say no you must not contact the children, you must not have any contact with them, stay away because that does not seem fair on children or really that fair on the teachers either so what I would say I think is this, if there is any question of the teachers getting paid work from the children's families then the kindergarten they ought to make it clear in the furlough agreement that there is to be no payment from the family in these circumstances on a private basis and to advise the members of staff that they can have limited contact with the children but they should use their discretion and ensure that that does not tip over into providing effectively a virtual childcare service.

Emma: Thank you, we have still got about three questions, we have also about three minutes so maybe if we can see if we can quickly answer all of these or then at least a couple. One of our employees has been furloughed, we ask all employees to check in each morning to state they are healthy or not and either working from home or relaxing at home. I will still like her to do this to make sure she is okay, I presume this is fine and ideally I would like to compel her to do this as I want to make sure she is okay.

Jonathan: Short answer, no you cannot compel and it is not fine it is a bit risky actually.

Emma: Can a sole director be furloughed?

Jonathan: I would refer you to the answer that Julian and I gave earlier, there is a distinction between an individual's role as an employee and their duties as a director so a sole director can in principle be furloughed and it needs careful management in practice. Julian would you like to add to that?

Julian: So, yes and no. In a sense you have answered the question but it is down to this issue of working out what is carrying out statutory duties as an officer of the company and what is carrying out duties as an employee and I think the danger here of course is that a sole director is furloughed and gets paid under the government scheme and then subsequently HMRC come along and say well actually we have had a look at what was going on and you are actually working through this and you should not have claimed under the scheme and there is always a risk of that I am afraid but theoretically carrying our purely statutory duties would not amount to a breach of the furlough but if the director is actually carrying out thing which are not statutory duties that are part of their contract of employment then it is not furlough.

Emma: Thank you and maybe we will just really quickly go through the last question as well and then we will be finished. Bearing in the mind the furlough scheme is supposed to be there to prevent employers having to make redundancies do you think there is a risk of HMRC declining to pay if entirely profitable employers whose business is unaffected but who might have employees whose jobs cannot be done from home decide to furlough employees even though in reality they would not have considered redundancies.

Jonathan: okay I can answer this one quickly you will be pleased to hear. If the business is not affected by COVID-19 then you are not entitled to put people on furlough. That is the test, the business has to be adversely affected by COVID-19. Now that is quite broad, the test does not go on to say so that you have to make redundancies, HMRC have not set the hurdle very high at all but for business who are not affected by COVID-19 and there are businesses of course who are not adversely affected they are seeing more work at the moment, an increase in demand, they are not able to put people on furlough.

Thank you, Jonathan. Hopefully we have now answered everybody's questions and hopefully you have all enjoyed it, thank you so much again Jonathan, Amber and Julian for all your presentations and answers to the questions and I think that is all from us.