Louise Plant
Senior Associate
Statutory Code on Dismissal and Re-engagement – the crackdown on the practice of ‘fire and re-hire
“Fire and rehire” refers to a situation where an employer dismisses a worker (usually because the worker does not consent to a change to their contractual terms and conditions of employment), but immediately following the dismissal, the employer offers to re-engage a worker on new contractual terms.
You may be familiar with this term following the events of P & O Ferries last year (https://www.theguardian.com/uk-news/2022/mar/17/po-ferries-halts-sailings-before-major-announcement) and the dismissal of 800 workers. However, the practice is viewed unfavourably by the Government and is said to have several negative consequences, such as being harmful to employees’ interests, damaging the employment relationship, potentially resulting in conflict, and subjecting the employer to both legal and reputational risk. The Government is also concerned that the threat of dismissal is used as a negotiating tactic to pressure workers to accept a change in terms and conditions, rather than as a last resort after all other options have been exhausted.
As a result, the Government is proposing to implement a Statutory Code on Dismissal and Re-engagement (the Code). The Code’s purpose is to ensure that employers carry out meaningful consultation with workers when proposing to amend terms and conditions of employment and explore alternatives to dismissal. The Code will apply not only in circumstances where an employer dismisses and re-engages its existing staff but also in situations (as in the P&O Ferries case) when the employer dismisses its existing staff intending to replace them with completely new staff.
The Code is currently out for consultation (closing 18 April 2023), but employers should be aware of the principles set out within the Code and how it may affect practices going forward.
Key provisions
The Code emphasises the importance of ongoing consultation with workers regarding proposed changes and providing relevant information to them. Whilst the information and consultation process will depend on the individual circumstances, the Code provides that:
- A recognised trade union, employee representatives, or the affected individuals themselves should be informed and consulted.
- The information shared should explain the nature of the proposals, the business objectives and reasons for the changes, any timeframe for implementation and details of who will be affected. Along with any other relevant information.
- The employer should also be clear with workers as to what will happen if an agreement cannot be reached - i.e. dismissal and re-engagement, or unilaterally imposing the changes. Although these potential implications mustn't be used as a negotiating tactic.
Information and consultation should be conducted as early as possible to facilitate constructive discussion. Consultation should still be carried out, even if it is believed that the employee/representative is unlikely to agree to the proposed changes.
Employers will also be required to continually review the business requirements for any changes, to ensure there are no reasonable alternatives. Reassessment should be carried out at the beginning of the process, during the consultation and, importantly, before making any dismissal decision.
What effect will the Code have on employers?
Whilst the Code has come about following recent media attention over “fire and re-hire” practices, the principles set out in it are unlikely to come as a surprise to employers. This is because the decision to ‘fire and re-hire is not usually taken lightly and employers are generally aware of the risks of doing so. Rarely will an employee’s contract entitle an employer to make anything more than minor changes to terms and conditions unilaterally, and even where the contract does expressly permit more substantive changes without an employee’s agreement, this right must be exercised by employers reasonably. As a result, an information and consultation process is usually carried out anyway in an attempt to agree on a variation of terms, or reduce the risks of any subsequent claim(s). The draft Code, therefore, covers a practice that employers may already implement as a matter of good practice in any event.
Even so, if the draft Code is implemented following the consultation, employers may need to rethink their practices to ensure that they comply with the Code. They will need to proactively satisfy each of the requirements and document their actions to demonstrate compliance. This is important, as a Tribunal will have jurisdiction to increase compensation awards from associated claims by up to 25% for unreasonable non-compliance with it.
The take away points are as follows:
- The Code will apply to all employers, regardless of an organisation’s size, the total number of employees, or the number of employees that may be affected by the proposed changes.
- The Code will not apply to dismissals by reason of redundancy.
- The Code will apply regardless of the reason for the change in terms and conditions.
- Dismissal must be a last resort following meaningful consultation. This means that consultation may take longer to conclude as a result.
- Following the Code will not eliminate the risk of any potential claims arising as a result of unilaterally imposing changes, or dismissing and reengaging a worker on revised terms, but evidence of compliance with it may assist the defence of such claims.
- The Code does not replace any other existing contractual or legal obligations (e.g. those set out in a collective bargaining agreement; collective consultation etc.).
If you would like advice on how to implement changes to terms and conditions of employment, please contact our Employment Team.
A copy of the Draft Code can be found here:
