Melissa Mones v Lisa Franklin Limited

The Employment Appeal Tribunal dismissed the claimant's appeal against the Employment Tribunal's dismissal of an unlawful deduction from wages claim. The core legal principles were: (i) Treasury Directions implementing the Coronavirus Job Retention Scheme (CJRS), issued under sections 71 and 76 of the Coronavirus Act 2020, created rights and obligations as between HMRC and qualifying employers but did not themselves create statutory or contractual obligations owed by an employer to its employee; (ii) an employee's entitlement to furlough pay is governed by existing employment contract rights unless the parties agree otherwise; and (iii) where the parties had expressly varied the claimant's contract by a written furlough letter specifying the method of calculation, that express term prevailed and an inconsistent implied term could not be introduced.

Material subsidiary findings included that the claimant had accepted the furlough letter's terms before the variation took effect and was paid in accordance with it, and that the CJRS did not displace existing employment law rights.

This was an appeal from a judgment of the London Central Employment Tribunal dismissing a claim for unauthorised deductions from wages. The claimant, a part-time receptionist, had been placed on furlough during the pandemic and paid on the basis set out in a furlough letter dated 30 March 2020. She alleged she had been underpaid because her furlough pay had not been calculated according to the formula in the Treasury Directions implementing the CJRS, and sought the shortfall under section 13(3) of the Employment Rights Act 1996.

Nature of the claim/application: unlawful deductions from wages (section 13 ERA) arising from alleged underpayment of furlough pay.

Issues framed by the court:

• Whether the Treasury Directions and the schedule implementing the CJRS created a statutory or contractual entitlement enforceable by the employee against the employer;
• Whether, alternatively, the formula in the CJRS could be implied into the claimant's contract (including by reference to the implied duty of mutual trust and confidence);
• Whether the Employment Tribunal erred in its finding that the claimant had accepted the contractual variation set out in the furlough letter and had been paid accordingly.

Court's reasoning and conclusions: The EAT accepted that the Treasury Directions were delegated legislation and are subject to ordinary principles of statutory interpretation, but concluded that their language and structure showed they governed obligations between HMRC and employers (reimbursement and claim conditions) rather than imposing direct obligations on employers to pay employees according to the CJRS formula. The Tribunal had found, unchallenged on appeal, that the claimant had agreed the furlough letter's terms which varied her pay calculation; an express term cannot be displaced by an inconsistent implied term. Accordingly there was no basis for an unauthorised deduction under section 13 ERA. The court also observed that, in a different factual situation where no such agreement existed, an implied term adopting the CJRS formula might, in principle, be arguable, but that was not this case.

Appeal dismissed. The EAT held that the Treasury Directions and CJRS schedules created rights and obligations between HMRC and qualifying employers, not statutory or contractual rights enforceable by employees against their employers; the claimant had accepted an express contractual variation in the furlough letter which governed her furlough pay and precluded implying an inconsistent term, so there was no unauthorised deduction under section 13 ERA.

Appeal from the London Central Employment Tribunal (Employment Judge Nicklin), reserved judgment sent 9 August 2021; appealed to the Employment Appeal Tribunal which delivered judgment on 18 November 2022 ([2022] EAT 199).