Melissa Mones v Lisa Franklin Limited

The Coronavirus Job Retention Scheme did not alter existing employment rights or impose a statutory or contractual obligation on an employer to pay an employee according to its reference-salary formula. The Treasury Directions governed the respective obligations of HMRC and qualifying employers.

Furlough pay therefore depends on the employment contract. An implied term adopting the Scheme formula cannot be implied where the parties have expressly agreed an inconsistent method of calculating furlough pay. In the absence of an express alternative agreement, an implication based on mutual intention may be possible, but this is fact-sensitive.

The claimant, a part-time receptionist, was furloughed from April to September 2020. The respondent's letter stated that it would pay 80 per cent of her average monthly earnings from her revised working arrangement beginning in January 2020. The Employment Tribunal found that she accepted that variation and was paid in accordance with it.

The Tribunal dismissed her complaint of unauthorised deductions from wages. She appealed, contending that the Coronavirus Job Retention Scheme formula was implied into the furlough agreement and determined the wages properly payable under section 13 of the Employment Rights Act 1996.

The central issue was whether the Treasury Directions governing the Scheme imposed an employer-to-employee obligation to calculate furlough pay by the Scheme formula, notwithstanding the agreed contractual variation.

1. Appeal dismissed. The Tribunal made no error of law in concluding that there had been no unauthorised deduction from wages.

2. The Treasury Directions made under sections 71 and 76 of the Coronavirus Act 2020 were a form of delegated legislation and fell to be construed by ordinary statutory principles. Properly construed, each Direction applied to HMRC and required it to administer and make payments under the Scheme. The Scheme's stated purposes concerned the obligations between HMRC and a qualifying employer.

3. The Scheme gave qualifying employers a grant to assist with furlough costs. It neither required an employer to adopt the Scheme nor required an employer which did so to calculate an employee's contractual furlough pay by the Scheme formula. Its reimbursement limits and qualifying-cost conditions regulated the employer's civil relationship with HMRC. They did not create statutory or contractual obligations between employer and employee.

4. The only possible source of the asserted entitlement was therefore the contract. The unchallenged Tribunal finding was that the claimant accepted the Furlough Letter, which expressly varied her contract so that she would receive 80 per cent of average monthly earnings from her new working pattern. A term contrary to that express term could not be implied. The implied duty of mutual trust and confidence could not produce the same inconsistent result.

5. As the claimant was paid according to the agreed variation, no additional wages were properly payable for section 13 of the Employment Rights Act 1996. Her section 23 complaint necessarily failed.

Obiter: where there is no express agreement on an alternative amount or methodology, an employee may in an appropriate fact-sensitive case establish an implied contractual term adopting the Scheme formula through the parties' mutual intention. That possibility would not arise because the Scheme itself conferred a right on the employee.

• Employment Appeal Tribunal: dismissed the claimant's appeal: [2022] EAT 199.
• London Central Employment Tribunal: dismissed the claimant's complaint of unauthorised deductions from wages in a reserved judgment sent on 9 August 2021.