Fire and rehire – what is it and what do employers need to know?

The use of “fire and rehire” by employers is not a new concept. It has, however, been in the spotlight recently. This is perhaps mainly due to the detrimental effect that the pandemic has had on businesses. Employers are increasingly making difficult decisions, including in some cases seeking to agree or impose changes to employees’ terms and conditions of employment.

Unions including the TUC and GMB have called on the Government to outlaw the practice. The TUC has said that the practice of fire and rehire has become widespread and that “nearly 1 in 10 employees have been told to re-apply for their jobs on worse terms and conditions or face the sack” since the first lockdown in March 2020.

What is 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.

There are a number of ways in which changes can be made to an employee’s contract of employment:

Contractual right. Some contracts of employment may include a term that allows the employer to make a change unilaterally.
Agreed variation. Where there is no contractual right to vary, the change can still be made if the employee agrees to it.
Collective agreement. A change can be made to the contract of employment where this is agreed with the representatives of a recognised trade union.

So what options are available to employers where there is no contractual right for the employer to impose the change and the change is not agreed? In that situation, one option that the the employer could choose is to dismiss the employee and offer to rehire them on new terms.

What are the risks for employers of the use of hire and rehire?

Fire and rehire is permitted under employment law. However, it must be carried out properly and it comes with a level of risk for the employer.

In particular, an employee with more than 2 years’ service could issue a claim in the Employment Tribunal for unfair dismissal. To defend such a claim, the employer would need to argue that the dismissal was for a fair reason (usually “some other substantial reason”); and that they have followed a fair and reasonable procedure. An Employment Tribunal will normally consider a number of factors including the employer’s motives for introducing the change, whether employees were given reasonable warning of the proposed change, whether consultation with the employees has taken place, and whether a majority of employees have accepted the change.

Also, if an employee is dismissed without all or any of their notice entitlement, they could issue a claim in the Employment Tribunal for wrongful dismissal.

In addition, where an employer is considering firing and rehiring 20 or more employees within a 90-day period, collective consultation obligations will apply.

Employers should also be aware of the potential risks of industrial action and reputational damage.

It is therefore important for an employer to consider any proposals carefully and seek legal advice before taking action.

Fire and rehire – the debate

The Government had, in 2020, asked ACAS to report on the use of fire and rehire. The report has been received by the Government but has not been made public. On 27 April, MPs debated the use of fire and rehire by employers. A Commons Library briefing paper was published on 26 April to inform the debate.

During the debate, Business Minister Paul Scully MP stated that fire and rehire should “only ever be used as an option of last resort” and it is unacceptable to use it “simply as a negotiation tactic”. However, he recognised that it is important for businesses to be able to take difficult decisions necessary to preserve their commercial viability. He gave the example that it would be “counterproductive if measures that prevented businesses from rehiring staff on different terms and conditions meant that a business could no longer survive, so that its staff found themselves out of work entirely.” When asked whether the ACAS report would be published, he replied that the Government is “fully considering that”.

Comment

Paul Scully MP acknowledged during the debate that it is “important to get the balance right”. He stated that “that the vast majority of employers want to do the right thing by their employees. For most employers, the choice to let someone go is not something to be taken lightly. It usually comes at a time of great financial uncertainty for the business.”

The Government has stated that it will publish its response to the report from ACAS “in due course”.

30 April 2021

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