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Settlement Agreements, Notice and the impact of Furlough

Settlement Agreements

Wednesday, April 29, 2020

Settlement Agreements are the only way by which a potential claim to an Employment Tribunal can be lawfully compromised.

For such an Agreement to be enforceable, it must be in writing, specify the particular complaints to which it relates and the employee must have the benefit of independent advice from an adviser who has the benefit of professional insurance, or in the case of an accredited trade union representative is certified by the trade union as being qualified to give advice.

Frequently with Settlement Agreements, individuals receive a payment in lieu of notice.  This ends their employment sooner than if they remained on the books for a period of notice.  However, once an employee’s employment is terminated, I suggest eligibility for furlough pay ceases at the same time.  Therefore the employer would be well advised to have furlough and notice pay run alongside each other.

In principle can an employee on furlough be subject to notice?  There is no reason why not.  An employee can receive holiday whilst on furlough, so why not notice.  Eligibility for furlough is simply by reference to absence on grounds related to coronavirus.

This then raises the question what should be the notice pay.  Should it be the pay that the individual receives whilst on furlough or should it be their normal pay?  There is no clear definitive answer.  There is an argument that says the contractual pay at the point of notice being given is furlough pay and that is what the individual should receive.  However, for me, I believe the better argument is they should receive normal pay during a period of notice, effectively topping up furlough pay.  I suspect an Employment Tribunal will do its very best to ensure an employee receives full pay during notice period and will probably make reference to Sections 221 and 222 ERA 1996.  That calculates a week’s pay by reference to normal working hours.  No doubt an Employment Tribunal will say that notice pay should be by reference to normal working hours also.

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