Fire and Rehire

The practice has been widely condemned by trade unions and politicians, with some calling for an outright ban on the use of ‘fire and rehire’. It typically occurs when a business wants to change the terms and conditions of workers who aren’t willing to agree to the change. The employer dismisses those workers and either offers them re-engagement on worse terms or employs new (often cheaper) workers who are willing to accept those terms. Often employers ‘jump the gun’ where agreement could have been reached if they had taken some additional steps.

The adverse publicity surrounding the P&O case prompted the government to implement a new statutory Code of Practice on dismissal and re-engagement. This Code has now been published and came into force this month (April).

The Code will apply where an employer wants to make changes to terms and conditions and envisages that, if workers do not agree, it may dismiss them and offer them re-employment on the new terms or engage new workers to perform the roles on the new terms. It sets out a step-by-step process that an employer should follow to explore alternatives and to engage in meaningful consultation:

• The employer should communicate the desire to change terms and conditions.

• Once it becomes clear that employees will not accept the new terms without negotiation, the employer should reassess the business strategy behind changing terms.

• Where the employer decides to press ahead with the changes, it must engage in meaningful consultation. A longer consultation period is likely to increase the likelihood of matters being resolved by agreement. A threat of dismissal should never be used solely as a negotiating tactic.

• Employers should consider dismissal and re-engagement as a last resort. In these circumstances, the employer should give as much notice as possible of the dismissals and consider whether any employees may need longer notice to make arrangements which might better enable them to accommodate the changes.

• Even after serving notice, the employer should consider any changes, provide practical support to employees, and consider the possibility of a phased introduction of changes over a longer period.

Failure to comply with the Code will not give rise to a standalone claim. However, where an employer fails to take the Code into account, an employment tribunal will have the power to apply an uplift of up to 25 per cent to compensation awarded in a relevant claim such as unfair dismissal.

The aim of the Code is to discourage employers from using ‘fire and rehire’ as a quick fix when it wants to push through terms and conditions. If an employer genuinely believes that it may need to dismiss and re-engage to implement the new terms, then the Code aims to ensure it has gone through a proper process and considered all alternatives before that happens. The government firmly opposes ‘fire and rehire’ being used as a negotiating tactic.

From a business perspective, it’s important for employers to be aware of the Code and to seek advice before implementing any changes to terms and conditions. Often, agreement with workers can be reached. However, employers need to be aware that there are now potentially adverse consequences if they seek to push through changes to terms and conditions without taking the Code into account.