FURLOUGH FRAUD AND WHISTLEBLOWING ON THE INCREASE

It has been revealed by charities ‘Protect’ and ‘Whistleblowers UK’ that some employers are committing fraud by using the Furlough scheme to make large amounts of money by falsely claiming that employees have been furloughed.

These charities are reporting that this is becoming a growing problem where a minority of employers are claiming up to 80% of staff salaries whilst staff are still working and providing services to their businesses.

There have been reports that staff have been threatened with dismissal by some unscrupulous employers if they do not agree to work after being furloughed.

HMRC themselves have confirmed that they have received 795 written and online complaints via its portal about furlough fraud up to 14 May 2020. The increase in furlough fraud may also be connected to the closure of HMRC’s hotline as a result of staff having to work from home.

The types of Furlough fraud that has been uncovered are as follows:-

. An employer furloughs staff but then asks them to continue working or to volunteer unpaid.
. Employers decide to furlough staff without telling them and those staff only realise when they are paid.
. Employers claim furlough payments for a ghost employee who may be somebody they dismissed or somebody who is not an actual employee.
. Furloughing staff and not paying them what they are owed or the full amount that they are entitled to under the scheme.
. Employers making backdated claims that include periods when employees were working.
. Employers pretending to hire staff shortly prior to the qualifying period to take advantage of the scheme.

HMRC has made it very clear that under the Coronavirus Job Retention Scheme, they will be checking claims and that monies will need to be repaid if the claim is found to be fraudulent or is based on inaccurate information. HMRC have also reserved the right to audit all aspects of any claims that are made and this is likely to last for a number of years.

The writer has also spoken to employees who have been asked to continue to work whilst being furloughed, or to be complicit in their employer’s actions. This can put tremendous strain on the employment relationship and can irretrievably damage the mutual trust and confidence and can lead to employment tribunal claims.
Employers are reminded that it is not only unlawful to commit Furlough fraud but that disgruntled employees who are threatened or dismissed can ultimately complain to the employment tribunal and bring claims for automatic unfair dismissal, whistleblowing and detriment. It is also highly likely that such claims will attract media publicity and cause reputational damage to the business.

There are also criminal offences that may be committed including conspiracy to defraud which is a common law offence attracting a maximum 10-year custodial sentence. Another common law offence is to cheat the public revenue which can result in life imprisonment. There are also statutory offences for example covered by the Fraud Act 2006 which can also result in a custodial sentence.

If you have concerns about whistleblowing and any general questions about the Furlough scheme then contact Steven Eckett on 020 703 5034 or seckett@meaby.co.uk