New Code of Practice will be taken into account by employment tribunals when considering compensation.
The statutory Code of Practice on Dismissal and Re-engagement (the Code of Practice) came into effect on 18 July 2024. The Code of Practice provides guidance for employers seeking to change contractual terms and aims to resolve conflict and minimise the need to resort to dismissal and re-engagement on new terms.
We reported on the draft version of the Code of Practice in February. For details please see our article:
Draft Code of Practice on dismissal and re-engagement published
The final version of the Code of Practice largely mirrors the draft version and there are no substantive changes. The key principles are as follows:
The key principles outlined in the draft Code are as follows:
- Employers should provide meaningful information to employees and their representatives at an early stage and should continue to consult and negotiate with them in a spirit of openness and good faith for as long as possible to seek a resolution;
- Employers should continually reassess their proposals in the light of negotiations and consultation feedback;
- If changes are agreed, the employer should put them in writing, setting out clearly what the amendments are and when they take effect. Employers should continue dialogue with staff over a period of time as new terms are adapted to, and feedback should be sought;
- If it becomes clear that employees are not going to accept the proposed changes, employers should re-examine their proposals and be aware of the risks of claims inherent in unilaterally imposing new terms;
- Employers should only dismiss as a last resort, after re-examining proposals and concluding there is no other option available.
- Employers should not use this process as an opportunity to change other contractual terms which have not been the subject of consultation.
As with other statutory codes of practice, the Code of Practice is not the letter of the law, but employment tribunals will be required to take it into account when considering the award of compensation in relevant cases, including unfair dismissal claims. Tribunals will be able to increase relevant awards by up to 25% where the Code of Practice has not been followed. A proposal that this uplift would also apply to a protective award where collective redundancy consultation requirements had not been complied with has not been brought into law.
Labour plans to ban “fire and rehire”
The new Labour Government has made clear its commitment to end "fire and rehire" practices except where there is genuinely no alternative.
The King's Speech 2024 background briefing notes state that the Government is committed to delivering its “New Deal for Working People” in full through its “Plan to Make Work Pay” and a new Employment Rights Bill.
The Plan to Make Work Pay includes a commitment to “end the scourges of ‘Fire and Rehire' and ‘Fire and Replace' by reforming the law to provide effective remedies and replacing the previous Government's inadequate statutory code [i.e. the new Code of Practice]”. It also states that:
“It is important that businesses can restructure to remain viable, preserve their workforce and the company when there is genuinely no alternative, but this must follow a proper process based on dialogue and common understanding between employers and workers.”
It is currently unclear whether this means that the Code of Practice will in time be amended or replaced.
Employers should seek legal advice at an early stage if planning to make changes to employment contracts where there is a possibility that agreement will not be reached on the changes with employees or their representatives. Such consultation processes can require significant planning and can be time-consuming, sensitive and complex. In addition to the legal and financial risks of claims, such processes carry considerable risks to reputation and workplace relations.
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.