ACAS publishes guidance on “fire and rehire”

Fire and rehire is typically relevant where an employer is seeking to make changes to an employee’s terms and conditions of employment; and the change is detrimental to the employee. This could be, for example, a reduction in pay or changing working hours.

Changes can be made to an employee’s contract of employment in a number of ways. There may be a contractual right to make the change, or the change may be agreed between the employer and the employee or between the employer and the representative of a recognised trade union.

Fire and rehire

However, if there is no contractual right to make the change and no agreement, an employer may be considering dismissing the employee and offering to re-engage them on new terms. This is sometimes referred to as fire and rehire. Fire and rehire is permitted under employment law, but as we set out in our separate post here, it comes with a level of risk for employers.

The Government confirmed in June 2021 that it did not intend to legislate to prevent the practice of fire and rehire. Instead, it asked ACAS to produce guidance to help employers explore all other options before considering fire and rehire to change employee contracts.

ACAS has now published updated advice on changing employment contracts. This includes guidance aimed at helping employers to avoid fire and rehire practices. The updated guidance includes practical suggestions on making changes to employment contracts, including:

Proposing employment contract changes – which includes guidance on providing information about the proposed changes, what information should be provided, and the use of flexibility clauses
Consulting about employment contract changes – which includes guidance on what consultation is, why and how employers should consult, who employers should consult with, and training for those involved in consultations
What to do if changes are agreed – which includes guidance on putting the change in writing and monitoring and reviewing the change; and
What to do if changes cannot be agreed – which includes guidance on continuing to explore all options for as long as reasonably possible, keeping discussions constructive, and options of imposing the change or the use of fire and rehire.

The guidance states that employers should “thoroughly explore all other options” before deciding to fire and rehire, and that this should be a last resort. It reminds employers that they must have made all reasonable attempts to reach agreement through full and thorough consultation. The guidance also sets out some of the risks of proposing to fire and rehire, including:

Damage to trust and working relations in an organisation
Losing valued people from an organisation – either because they do not accept the offer of a new contract or because they leave afterwards because they are not happy with the change or the way it was made
Legal claims, including potential claims of unfair dismissal
Reputational damage, making it difficult to attract new employees
Industrial action if there is a recognised trade union, as well as damage to relations with the union.

Employers should also be aware that if they are proposing to dismiss and rehire 20 or more employees, the obligations to collectively consult will apply.

Comment

Fire and rehire can be an important option for employers, for example if they are facing difficult circumstances and need to make decisions to protect the viability of the organisation. However, this has come under increasing scrutiny recently, with some unions calling on the practice to be banned. Any proposal to fire and rehire employees must be considered carefully and properly managed. Employers should consider seeking legal advice on this issue before taking any decisions.

17 November 2021

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