How changes to the furlough scheme and other issues will affect the charity sector

With lockdown now starting to ease and the Government hoping to kick-start the economy, we turn our attention this week to supporting and helping you to prepare for the next stage of the new normal.

Changes to the COVID-19 job retention scheme

The furlough scheme will be extended to 31 October 2020. Some key conditions are:

• The scheme will be closed to new entrants from 30 June – you should therefore be thinking now about which employees you may need to furlough going forward. If those employees are not already on furlough, or have not previously been furloughed for a three week minimum period, you will need to put them on furlough on or before 10 June in order for them to qualify for the scheme going forward.
• Cap on headcount – from 1 July you will not be able to claim for more employees than you have had in a previous claim period. This means that you will need to consider now the maximum number of employees you may want to furlough up to 31 October and act accordingly.
• Improved flexibility – from 1 July you will be given the flexibility to bring furloughed employees back part time in a bid to help support people back to work. You must enter into new written furlough agreements with employees who are to work on a part time basis whilst furloughed. This must be done in accordance with existing employment law.
• Tapering requirement – from 1 August, the level of Government grant provided through the scheme will be tapered to reflect that people will be returning to work. Here is a table showing who will pay what and when:

Furlough and volunteering

Furloughed staff remain unable to volunteer for their own organisations. They can volunteer for other charities. If you are thinking about bringing parts of your workforce back from furlough, then make sure they are able and ready to return to your business, even if they have been supporting charities elsewhere.

Employees refusing to return to work

What should you do if you are faced with an employee who refuses to return to work because they are worried about catching COVID-19? Normally employers can be robust in relation to employees who refuse (for example, withhold pay or take disciplinary action). However, these are not normal times. 

In order to reduce the risk of any claims being brought against you (e.g. unfair dismissal, discrimination, the right not to be subject to a detriment, whistleblowing on health and safety grounds), it is important that you:

• Listen to the concerns that your employees have, be sympathetic to those and seek to address them so far as possible by looking at alternatives (for example, working from home, adjusting their duties from home, adjusting their working pattern so that they can use public transport during off peak times, allowing them to carry out their duties in a designated space in the workplace away from other staff, put them on holiday, furlough them etc).
• Discuss and widely publicise the safety measures that you have put in place (for example, deep cleaning, adjusted workstations, provision of PPE)
• Train employees on health and safety in the workplace.
• Establish clear channels by which employees can raise health and safety issues and concerns, and act quickly to rectify any legitimate issues and concerns raised through those channels. For example, if some staff are not observing social distancing rules, act to address it.
• If you have exhausted all options you may then consider disciplinary or dismissal, but do take advice before going down those routes.

Top tip: Communicate widely and document your decision-making process.

Travel to work

A particular concern for charities with premises in cities (especially Central London and others with underground networks) is the government guidance to avoid public transport wherever possible when travelling to work.

In many cases an employee might be less worried about working, and more worried about getting to the office safely. Large numbers of commuters in London and the South East do not choose to take public transport to work – many do not have a car and live too far away from work to cycle or walk, and so they don’t have a choice. 

Should you have any employees with concerns about this, such concerns should be dealt with in much the same way as any other worries about returning to work, as set out above. Employees can also be directed to the government's short guidance note, here. This guidance note sets out a range of protective measures for individuals to take when looking to travel on public transport, for instance:

• Travelling at off peak times wherever possible (you might consider altering employees' working hours in order to facilitate this)
• Use quieter starting and end stations
• Where a face covering
• Try to maintain a distance of two metres between passengers or, where this is impossible, keep the time you spend near to others as short as possible, always avoiding physical contact. 

Wrongful Trading – an update

As part of a previous briefing (published 3 April), we talked about the relaxation of wrongful trading rules for charitable companies. These rules state that a company director can be personally liable to their company's creditors if the company continues to trade in circumstances where that director knew or ought to have known that there was no reasonable prospect of the company avoiding insolvent liquidation or administration.

Details on the suspension of personal liability for wrongful trading have now been provided, as part of the Corporate Insolvency and Governance Bill 2020.

The Bill will apply retrospectively to suspend the wrongful trading provisions for a temporary period from 1 March 2020 until the date falling one month after the coming into force of the Act. The effect of the legislation is that, in the case of a company's insolvency which raises potential issues of wrongful trading on the part of a director, the court is able to 'assume that the [director] is not responsible for any worsening of the financial position of the company or its creditors that occurs during the relevant period'.

It remains to be seen how this suspension of the insolvency rules will apply in practice but what is clear is that other fiduciary directors' duties (and trustees' duties as a matter of charity law) will remain engaged. Trustees should therefore continue to bear all their legal obligations in mind as part of their decision making processes, particularly insofar as those decisions impact on creditors. Close and regular review of cash flow should remain a priority and all your discussions should be properly recorded. 

AGMs

Over recent weeks many of our clients have asked us about holding a virtual or online AGM. 

In normal times, whether this can be done or not would be determined by the charity's governing document; however these are not normal times, and the government is seeking to legislate to allow certain corporate bodies (including charitable companies and charitable incorporated organisations) flexibility to hold virtual members' meetings even where this is not contemplated in the governing document.

Once passed, the Corporate Insolvency and Governance Bill 2020 (referred to above in respect of wrongful trading) will enable general meetings of qualifying bodies held between 26 March 2020 and 30 September 2020 (the Relevant Period) to be held electronically. This can be shortened or extended by regulations in increments of up to three months at a time, with a longstop date of 5 April 2021, so it may be that the relaxation of the rules continues into next year. 

In particular, during the Relevant Period general meetings of charitable companies and CIOs:

• need not be held at any particular place
• may be held, and votes may be permitted to be cast, by electronic means or any other means
• may be held without any number of those participating in the meeting being together in the same place.

The legislation will also restrict members' rights to attend in person, participate in the meeting other than by voting, and request particular methods of voting. A copy of the text of the Bill can be found here.