On 24 January, the government published a consultation paper on the long-awaited draft Code of Practice on dismissal and re-engagement (commonly known as fire and rehire) which sets out employers’ responsibilities when they seek to change contractual terms.
Background
‘Fire and rehire’ is a practice employers sometimes adopt to vary terms and conditions of employment. Employees who refuse to accept the proposed new terms are dismissed and then re-engaged in a new contract with less favourable terms. In recent years, this controversial practice has attracted a lot of negative attention, and in early 2022, following pressure from trade unions and business groups, the government committed to creating a new statutory code on fire and rehire practices.
What does the code require employers to do?
The draft code sets out the specific steps that an employer should follow if it is considering changes to terms and conditions and foresees that it might dismiss employees if they do not agree to the proposed changes. Some of the important points detailed in the draft code are:
- the employer must consult with employees and/or their representatives about the anticipated changes;
- consultation should be meaningful and in good faith;
- a threat of dismissal should not be utilised as a negotiating tactic;
- if employees are not willing to accept the contractual changes proposed, the employer should re-examine the business strategy;
- the employer should communicate as much information as it is reasonably possible to help employees to understand the need for the changes and be in a position to make counter-proposals;
- ‘fire and rehire’ should be a last resort and only contemplated where all reasonable alternatives have been fully explored.
What happens if an employer fails to follow the code of practice?
The code itself does not impose any legal obligations on employers. However, once the code is in force, courts and employment tribunals considering relevant claims, including unfair dismissal, will be able to take the fire and rehire code into account. They will then have the power to apply an uplift of up to 25% of an employee’s compensation if the employer failed to comply with the code of practice when conducting a fire and rehire exercise.
Business secretary Grant Shapps said that the new code will crack down on firms mistreating employees and set out how they should behave when changing an employee’s contract.
The consultation ends on 18th April and the government has stated that the final code of practice will come into force ‘when parliamentary time allows’.
If you need advice on managing a business reorganisation or amending contractual terms, our experienced law team at Witans solicitors can help you reduce any potential risks. Get in touch with us if you’re in need of legal assistance with your employment disputes.
