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Helping businesses cope with COVID-19 — interim survey FAQs

We recently asked you for a steer on information it would be helpful for us to share to help businesses work through the challenges the COVID-19 pandemic poses.

And you delivered.

The initial questions largely fell into three categories — employment law, construction and rural. Here, we look at the most commonly asked queries with some thoughts from our experts. And keep an eye out for Zoom briefings on some of these topics, coming soon.

As ever, please bear in mind the information here is general. For specific issues we’d always recommend seeking professional advice.

Employment law queries

Does annual leave continue to accrue while I’m on furlough, and can employees take holidays on furlough?

Annual leave continues to accrue during furlough.

Further employees can choose to take holidays while furloughed.

Perhaps more significantly, current guidance suggests that the rules by which employers can require employees to take holidays continue to apply during furlough.

How does furlough work for those whose salaries are paid through public funding?

The government says it doesn’t expect many public sector organisations to furlough employees because many will provide essential services or contribute to the outbreak response.

The guidance goes on to say if employers receive ongoing public funding for staff costs, then they should use that money to continue to pay staff as normal and not furlough them. The same applies to non-public sector employers who receive public funding for staff costs.

The guidance on this is fairly complex and we would urge any employer faced with this issue to check the specific guidance and, if needs be, take advice.

Can I ask staff on furlough to help with an emergency piece of work?

If you’re asking staff to do something that’s for the benefit of the business then that would normally be work and therefore incompatible with furlough.

What work can furloughed directors do for their company?

While the guidance isn’t completely clear, our view is that furloughed directors should do the bare minimum that’s required to allow them to comply with their statutory duty — for example filing annual returns.

Can I furlough someone I’ve recently re-employed? And what about leavers whose new roles have been deferred?

You can re-employ and furlough someone, but you have to be mindful about dates. The employee must have been on your payroll 28 February 2020. Recently, the guidance suggested their employment with you should have originally ended prior to 19 March.

However, this was updated though on 23 April with no requirement that the employee had stopped working for you before 19 March.

The fact that someone resigned to take up another job is not a bar to you re-employing them if their new job was withdrawn or start date postponed.

Can I carry out a redundancy consultation process with furloughed workers?

Yes. We do not think that consulting with furloughed staff means that staff are “working”.

Unfortunately, it is clear that many employers are having to consider doing this in anticipation of the ending of the furlough scheme and the on-going economic challenges.

Construction law queries

Where would we stand contractually if main contractor requests we return to site?

Although Scottish government guidance at the current time recommends that all non-essential construction sites are shut down, there is actually no legal obligation on parties to do so.

What is obligatory on all businesses, including construction sites, however, is the obligation to take all reasonable measures to ensure that —

  • a distance of two metres is maintained between any persons on the premises
  • it only admits people to its premises in sufficiently small numbers to make it possible to maintain that distance
  • a distance of two metres is maintained between any person waiting to enter its premises

If your main contractor is seeking a return to site, both you and they need to be sure that you can comply with these obligations. Those who break those rules at the current time may be fined and repeat offenders have businesses forced to close.

Is a shutdown because of COVID-19 a force majeure event? If so, will it allow an extension of time, but no right to additional costs, or are there specific circumstances where that’s not the case?

Force majeure is not a concept that automatically applies in Scots Law.

It is only an option to consider if your contract specifically makes provision for delay caused by a force majeure event. Even then, it will depend on how force majeure is defined.

A general reference to force majeure, without definition, would appear likely to cover the current position forced by the pandemic, however, some force majeure provisions are more prescriptive so need to be checked carefully to see whether they are wide enough to cover the current situation.

Your contract will also determine the consequence of a delay caused by force majeure. Under many unamended JCT contracts for example (which do include force majeure as a relevant event), a contractor will be entitled to an extension of time but not loss and expense. That is not the case for every contract however, so the particular terms need to be considered with care.

Are there legal requirements where we have two workers in the same vehicle?

As with reopening construction sites, businesses are obliged to take all reasonable measures to ensure two metre distancing. If that’s not possible in a particular vehicle, alternatives may have to be considered.

Social distancing appears to be a concept likely to be with us well beyond lockdown. Employers are going to have to be innovative in order to limit additional costs while still meeting these requirements.

Why did external building maintenance, eg roofs, have to stop? Why can’t we do ground investigation works and environmental surveys (in open air, with clear distance between those working?)

It is recognised by the Scottish Government guidance that trades who are responding to urgent repairs and maintenance in domestic premises may continue providing no-one is showing signs of the virus.

Also, those who work on their own such as window cleaners or gardeners, or those working in isolated settings. The qualification to all this, is the obligation to maintain two metre distancing between everyone on a site.

NEC contracts — what's the situation with closing sites, suspending design activity, what kind of compensation events could COVID-19 initiate?

Assuming the standard NEC contract has not been amended, there are a few potential compensation events that might cover suspension of work on site depending on how that came about including —

  • 60.1(2) – if the employer does not allow access to the site by the date shown on the accepted programme
  • 60.1(4) – the project manager gives an instruction to stop or not to start any work
  • 60.1(5) – the employer or others do not work within the times shown on the accepted programme (others might include for example, statutory undertakers, utility providers, and so on)
  • 60.1(19) – an event occurs which satisfies all four of the following points: (1) the event stops the Contractor completing the works or completing the works as per the Accepted Programme (2) the event could not have been prevented by either party; (3) the event was so unlikely that no reasonable contractor would have allowed for it; and (4) the event is not one of the other compensation events listed in the contract

Remember the requirement to give notice within eight weeks of the event occurring as well as the requirement to give early warning. Unlike JCT contracts, all compensation events allow a contractor additional time and expense.

How can we deal with supply chain issues, where even if sites were open, contractors couldn’t secure the supplies they need?

We are likely to see many such issues when lockdown is eased — particularly if goods need to come from overseas. Lack of supplies/timely deliveries will also have an impact on the time and cost of delivery of construction projects. Again, who bears the risk of that will come down to what is written in your contract so it’s not possible to give generic advice.

If your contract requires notices of delay and/or loss and expense to be given, make sure you get those in promptly to preserve your position.

At this unprecedented time, it seems likely that parties to contracts which were entered into before lockdown are going to have to be creative to come up with solutions to solve problems just like these. Early identification of supply problems may assist in giving thought to whether a specification can be varied to enable similar products to be obtained more locally and/or rescheduling of work to accommodate delays in supply.

Rural queries

What’s the situation with agricultural mortgages?

Most lenders to the agricultural sector are operating in a similar manner as those operating in the residential sector in that any person or organisation in difficulty can apply for a mortgage holiday or other form of assistance.

It is best to speak to your mortgage provider or financial advisor, such as our colleagues at Golden Square Wealth Management, as soon as possible to discuss options.

And remember, as a mortgage is secured against your property, it could be repossessed if you do not keep up mortgage repayments.

What’s happening in the rural property market?

Evidence so far is that the agricultural sector continues to show the resilience it is famous for. Demand for agricultural land continues to prove strong. There even appears to have been a notable increase in demand for forestry land.

This could very well be driven not only by forward thinking farmers looking to expand but also by people looking for more stable investment opportunities in a turbulent time for less-tangible assets.

Many of the restrictions and problems that have plagued the residential property market since the lockdown, and led to a general slowdown, don’t necessarily apply to the agricultural and rural sector so in many cases there is no reason why rural property sales and purchases can’t proceed to settlement as normal.

The COVID-19 situation and response is fast moving, all responses here were correct at the time of publication.

Posted, 19 May 2020 Categories: Construction | Coronavirus | Coronavirus and construction | Coronavirus and employment law | Coronavirus and rural | Employment | Insights | Rural