Can an employer fire and rehire? The Government’s draft statutory Code

The Government has launched consultation on a draft statutory Code of Practice that sets out an employer’s responsibilities when seeking to change employment terms and conditions.

The announcement follows previous commitments to introduce a new Statutory Code of Practice on the use of ‘fire and rehire’ by employers. This has been prompted in particular by the circumstances surrounding the dismissal of around 800 employees by P&O Ferries in March 2022.

The draft Code – fire and rehire

The Code aims to give practical guidance in situations where an employer considers that it wants to make changes to its employees’ contracts of employment; and envisages that if the employees do not agree to those changes, it might dismiss them and offer them re-employment on those new terms.

Key provisions include:

Employers should share as much information regarding the proposals as is reasonably possible, in order to enable employees and their representatives to understand the need for the changes, ask questions and make counter proposals. Information should be provided as early into the process as possible.
Consultation must be meaningful and conducted in good faith, with the intention of seeking an agreed resolution. An employer must be honest and transparent about the fact that it is prepared, if negotiations fail and agreement cannot be reached, to unilaterally impose changes or dismiss employees. However, a threat of dismissal should never be used only as a negotiating tactic in circumstances where the employer is not, in fact, contemplating dismissal as a means of achieving its objectives.
Once it is clear to the employer that employees are not prepared to accept the proposed contractual changes, but it still needs to implement those changes, the employer must re-examine its business strategy and plans in light of the potentially serious consequences for employees. This includes considering carefully its analysis of why the changes are thought to be needed.
Any decision to dismiss and re-engage employees should be treated as an option of last resort, if the employer considers it cannot achieve its objectives in any other way.

Breach of the Code will not, in itself, render the employer liable to a claim. However, in the event of a relevant claim (for example of unfair dismissal), the Employment Tribunal must take the Code into account. A Tribunal will be able to increase any award it makes by up to 25% if the employer has unreasonably failed to comply with the Code; and decrease any award it makes by up to 25% if the employee has unreasonably failed to comply.

Employers must ensure that they continue to comply with existing obligations, including those relating to collective bargaining, collective consultation in redundancy situations and obligations under TUPE. Employers must also ensure that they do not do anything that may amount to an inducement to bypass collective bargaining.

Comment

The draft Code does not prevent employers from using ‘fire and rehire’ practices. It notes that there may be circumstances where no agreement can be reached an employer concludes that dismissal and re-engagement is necessary. However, it states that the employer should view this as an option of last resort, once the employer has concluded that there is no reasonable alternative. The purpose of the draft Code is to ensure that an employer takes all reasonable steps to explore alternatives to dismissal and engages in meaningful consultation with an open mind.

Consultation closes on 18 April 2023.

Draft Code of Practice on Dismissal and Re-engagement

27 January 2023

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