Fire And Rehire – Is It Lawful?

In 2022, in the wake of publicity around P&O Ferries' handing of the dismissal of a large number of employees, the government announced that a new Statutory Code of Practice would be introduced on the use of so called "fire and rehire" as a means of bringing about unilateral changes to terms and conditions.

Having decided against the banning the practice of "fire and rehire" altogether, the idea was that the Code would set standards for businesses to hold fair, transparent and meaningful consultations on proposed changes to employment terms and conditions

Following extensive consultation a draft of the proposed final Code was published in January 2024 and is likely to be approved by Parliament shortly, and become effective this Summer. The Code has been watered down somewhat from the original version and has been criticised as lacking real teeth.

The Code will apply regardless of the number of employees affected or the business reasons for the proposed changes to employees' terms and conditions. It does not apply where an employer is only envisaging making employees redundant, however in scenarios where an employer is envisaging both redundancy and dismissal and re-engagement in respect of the same employees, the Code will apply for as long as dismissal and re-engagement remains an option.

The Code stipulates that "an employer who has participated in a thorough and open information-sharing and consultation process, as part of which it has genuinely considered any reasonable alternative proposals, might opt for dismissal and re-engagement".

This final option should however be as a last resort.

Consultation should last as long as reasonably possible, and discussions should be meaningful.

Other key measures include:

1. Certain information should be provided by an employer in writing when embarking upon such an exercise:-

• What the proposed changes are (including what the proposed new and/or revised terms will look like).
• Who will be affected by the proposed changes.
• The business reasons for the proposed changes.
• The anticipated timings for the introduction of the proposed changes and the reasons for those.
• Any other options that have been considered.
• The proposed next steps.

2. The Code requires that as part of the process an employer will need to show it has re-examined its plans, based upon the feedback it has received from employees or their representatives, before reaching a final decision. Factors which an employer should consider in so doing are :

• The objectives which it is seeking to achieve.
• The negative consequences of imposing the proposed changes. These could include:
  • risks to the employer's reputation;
  • damage to relationships with its workforce or representative trade unions;
  • the potential for strikes or other industrial action;
  • the risk of losing valued employees; and
  • the risk of facing legal claims, and the associated costs and management time.
• Whether its proposals could have greater impact on some employees than others.
• Whether there are any reasonable alternative ways of achieving the employer's objective.

3. Employers must contact ACAS at an early stage, before raising the prospect of dismissal and re-engagement, but can do so at any earlier stage in a process.
4. A failure to observe the Code will not give rise to any stand-alone claims, however the Code will be admissible in evidence in proceedings before an Employment Tribunal, and any provision of the Code which is relevant to those proceedings must be taken into account. In such claims the Tribunal can:

• Increase any award it makes by up to 25%, if the employer has unreasonably failed to comply with the Code.
• Decrease any award by up to 25%, where it is the employee who has unreasonably failed to comply with the Code.

Comment

The Code sets out a useful step-by-step guide for employers and is easy to follow. From the summer onwards, it should be followed by employers embarking on such processes. It does not ban the practice of dismissal and re-engagement altogether but requires employers to initiate a meaningful dialogue with employees or their representatives to explore all options before acting unilaterally to dismiss and re-engage on new terms and conditions. The costs of a punitive protective award claim are already very high and with the prospect of an uplift for failing to follow the new Code minds should be focussed.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.