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The first High Court ruling on furlough – Carluccios

The High Court ruled that administrators are able to place employees on furlough and claim for their wages under the Coronavirus Job Retention Scheme. The restaurant chain Carluccio’s closed all their branches on 16 March 2020 and went into administration on the 30 March 2020. The administrators wished to ‘mothball’ the business and seek a sale while retaining employees under the CJRS.

The administrators sent a variation letter to a large number of employees offering them furlough leave, with the overall majority accepting the offer. Although it was clear in the guidance that the scheme was open to those companies that went in administration, the administrators sought clarity regarding how legally they could place employees on furlough and pay them wages in priority to other claims against the company. The case was heard remotely and a decision was needed to be made by 13 April 2020 being the last day of the 14-day window during which the administrators’ actions will not amount to the ‘adoption’ of any contracts of employment for the purposes of insolvency law.

The High Court allowed the administrators to extend the 14 day period to allow for those who have not responded to being placed on furlough to consent to those changes. However, the unvaried contracts of the non-responders would not be treated as adopted at the end of the 14-day period and so the administrators would not have to take the precaution of dismissing those employees in order to avoid incurring super-priority liabilities towards them.

The first High Court ruling on furlough – Carluccios

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