Scrase Law Employment Solicitors

Fire and rehire – a new statutory Code of Practice

The Government has published its response to consultation and an updated Statutory Code of Practice on Dismissal and Re-engagement (commonly known as ‘fire and rehire’). Subject to Parliamentary approval, the Code will be brought into effect later this summer.

The background – fire and rehire

The Government launched consultation on a draft statutory Code of Practice in January 2023, which was prompted in particular by the dismissal of around 800 employees by P&O Ferries in March 2022. 

Fire and rehire is a practice that may be used by employers when they are seeking to change terms and conditions of employment.  Where the employer does not have the contractual right to make the change, and there is no agreement, the employer may consider dismissing the employees and offering to re-engage them on new terms.  This is permitted in employment law but carries a level of risk for the employer.

Response to consultation

In response to the consultation the Government has published an updated statutory Code, which has now been laid before Parliament for approval.  The Code aims to provide practical guidance on avoiding, managing and resolving conflicts and disputes when employers use fire and rehire as a means of changing terms and conditions of employment.

The Code includes guidance on:

  • Who the employer should provide information to and consult with.
  • The information that should be provided by the employer, when it should be provided and in what format.
  • Meaningful consultation and the duration of the consultation period.
  • Raising the prospect of dismissal and re-engagement, which should not be done unreasonably early; and should not be used as a negotiating tactic to put undue pressure on employees in circumstances where the employer is not, in fact, envisaging dismissal as a means of achieving its objectives.
  • Re-examination by the employer of the proposals, taking into account any feedback it has received.  The Code sets out a number of factors the employer should consider at this stage, including the objectives it is seeking to achieve, the negative consequences of imposing the proposed changes, whether there could be any discriminatory impact on some employees; and whether there are any reasonable alternative ways of achieving the employer’s objectives.
  • How to communicate any changes that are agreed.
  • Imposition of new terms where it has not been possible to reach agreement, and the potential risks involved, including the possibility of claims and the impact on industrial relations.
  • Dismissal and re-engagement, as a last resort. The Code includes a reminder of the general principles of a fair dismissal.

The Code applies regardless of the number of employees affected, or potentially affected, by the proposals and regardless of the business reasons for the proposed changes.  The Code does not apply, however, where the only reason that the employer considers it might dismiss the employee is redundancy (which is precisely defined in employment law). 

Failure to comply with the Code will not, in itself, give rise to a claim against the employer.  However, it must be taken into account by an Employment Tribunal in any relevant claim, such as unfair dismissal.  If the claim is successful, the Employment Tribunal can increase any award it makes by up to 25% if the employer has unreasonably failed to comply with the Code.  It can also reduce any award by up to 25% where the employee has unreasonably failed to comply with the Code.

As a reminder, employers should continue to comply with other legal obligations that are relevant.  This could include, for example, the duty to collectively consult and the requirement not to do anything that may be an inducement to bypass collective bargaining.  Those obligations are not dealt with in this Code.

Comment

As noted in the Code, ‘it is for an employer to make economic decisions for the benefit of the business and to set the strategic direction of the business.’  This may sometimes lead an employer to consider proposing changes to terms and conditions.  The practice of fire and rehire is usually seen as a last resort.  The stated purpose of the Code is to ensure that an employer ‘takes all reasonable steps to explore alternatives to dismissal and engages in meaningful consultation with a view to reaching an agreed outcome with the employees and/or their representatives’.  

21 February 2024

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©2024 SCRASE LAW LTD. THIS POST IS FOR GENERAL INFORMATION ONLY AND IS NOT ADVICE. YOU ARE RECOMMENDED TO SEEK PROFESSIONAL ADVICE BEFORE TAKING ANY ACTION ON THE BASIS OF THIS POST