The Government has recently published the long-awaited draft of its statutory fire and rehire code of practice (the “Code”).
Fire and rehire, more properly referred to as dismissal and re-engagement, is the practice of terminating an employee’s contract of employment and at the same time, offering to re-employ them on different terms.
This approach is sometimes adopted by employers who need to issue essential amendments to employees’ terms and conditions of employment. Whilst this is a potentially fair approach for employers to adopt, careful consideration must be given prior to doing so. In particular, this approach should only be adopted following proper consultation with employees on proposed changes and a fair dismissal process must be followed.
Dismissal and re-engagement have significant consequences for staff, in that, if they refuse the offer of re-engagement by their employer, they will not be able to pursue an unfair dismissal claim. It also has potential adverse PR consequences for employers given the arguably unscrupulous nature of the process, and has resulted in large employers such as British Gas, British Airways, and, more recently, P&O Ferries receiving negative media attention.
The Government has expressed that the Code is intended to promote good industrial relations by encouraging a genuine and open process when an employer is proposing to change terms and conditions of employment. It is hoped that the introduction of the Code will deter employers from using the threat of dismissal during consultation in order to push employees into accepting those proposed changes.
What does the draft Code outline?
Inevitably, employers will need to take steps to amend employees’ terms and conditions from time-to-time for a variety of reasons including economic and strategic reasons, to reflect changes in working arrangements and practices, and/or to harmonise terms across the workforce.
The Code sets out the employer’s responsibilities when seeking to change terms and conditions of employment. At the heart of the Code, is the importance of meaningful consultation between employees (or representatives/trade unions as the case may be). Regardless of whether an employee’s contract is in writing or terms have been agreed upon verbally, that constitutes a legally binding agreement and should not be varied unilaterally.
The Code provides guidance and recommendations as to how employers should deal with any disagreements that do arise, or steps to take if an agreement cannot be reached. In particular, it advises:
- If numerous changes are proposed, where possible, they should be implemented over a period of time rather than all at once (depending on the proposals in question);
- Employers should inform employees that proposed changes will be kept under review so that original terms might be reintroduced or further amended if appropriate;
- Employers should re-examine their business strategy in the event agreement cannot be reached.
What does this mean for employers?
Changing terms and conditions of employment always has the potential to lead to disagreement between employers and employees. The introduction of the Code will hopefully minimise those disagreements, by encouraging employers to take a more consultative approach.
For employers, it is important to not only invite feedback from employees on proposed changes but to listen to any feedback that is given and give due consideration to that, as well as properly consider the necessity of the proposed changes at the outset.
As has been shown to be the case previously, there can be damaging consequences in adopting dismissal and re-engagement and/or seeking to unilaterally vary terms and conditions of employment, including:
- Risking or damaging reputation;
- Damaging employee relations and trust and confidence between staff, resulting in resignations and possible constructive dismissal claims;
- Strike action; and/or
- Employers being on the receiving end of legal action and have to spend management time and resources in defending that, as well as incurring associated legal costs.
Further, whilst the Code itself is not legally binding, Employment Tribunals will have the authority to increase compensation awarded to an employee by up to 25% where they find there has been an unreasonable failure to comply with this. For example, if an employer adopted a fire-and-rehire approach without any prior consultation.
In light of the above, employers would be well advised to ensure that any proposed changes are necessary (weighing up the potential adverse consequences of seeking to enforce those), and consider the effect any changes may have on employees prior to making any rash decisions.
The Government is now seeking views on the Code. This consultation will close on 18 April 2023.
How can we help?
For any advice on the subjects discussed in this article, please contact a member of our Employment Law team in Derby, Leicester, or Nottingham on 0800 024 1976 or via our online enquiry form if you require any assistance concerning the subjects discussed in this article.
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