New Code of Practice on “fire and rehire”

The government has launched a consultation on a new Code of Practice on dismissal and re-engagement otherwise known as “fire and rehire”. The consultation will run until 18 April 2023.

This is the result of a commitment to take action following the public outcry last year over P&O Ferries’ dismissal of 800 employees without warning so that they could be replaced with lower paid agency workers.

The Code of Practice is intended to provide practical guidance for employers who are seeking changes to employment contracts and envisage that, in the absence of employee consent, there is the prospect of dismissal and re-engagement of staff on new contractual terms.

The Code applies whether existing employees will be reengaged, or new employees brought on board to perform the same roles.

The Code also makes it clear that “firing and rehiring” should be a last resort option, after the relevant steps detailed in the Code have been taken, and if the employer’s objectives cannot be achieved in any other way.

Key aspects of the new draft Code include the following:

• Detailed steps for employers to take when seeking to make changes to staff contract. These steps include:

1. Providing as much information as reasonably possible to employees
2. Engaging in meaningful and good faith consultation for as long as possible
3. Exploring alternatives to the employer’s proposals.

• Depending on all the relevant circumstances, the process of informing employees about the proposals and consulting with them should involve trade unions, employee representatives, and/or individual employees.

• Meaningful consultation requires employees to understand the employer’s objectives and the nature of its proposals, including that dismissal may be required to impose the changes.

• If employee agreement is not forthcoming, as a first step, the employer should re-examine its business strategy and take into account the potential negative impact of proceeding. For example, reputational risk, damage to industrial relations, any element of unlawful discrimination, and any alternatives that would achieve the same objective.

• Threats of dismissal should not be used by employers as a negotiating tactic, if dismissal is not in fact contemplated.

• As much notice as possible of any dismissals should be given, with flexibility to provide longer notice if some employees need additional time, for example, to make childcare changes or plan alternative commutes.

• Re-engagement of employees on new contractual terms should not be used by employers as a chance to break employees’ period of continuous employment. This period is relevant for the purposes of bringing tribunal claims (such as unfair dismissal after two years’ service), and for entitlement to statutory payments (for example, a statutory redundancy payment).

• Employers should also consider other practical support that employees could be offered such as relocation assistance or career coaching.

Employment tribunals will need to take the Code into account where relevant to any proceedings, such as unfair dismissal and/or discrimination claims.

If the employer has unreasonably failed to comply with the Code, a tribunal will be able to uplift any compensation award by up to 25%. This mirrors the current approach in relation to an unreasonable failure to follow the statutory ACAS Code on Disciplinary and Grievance Procedures.

The Code will apply alongside any other statutory information and consultation obligations which may be relevant to the situation. That might include, for example, any collective bargaining arrangements with trade unions, the TUPE Regulations, and/or the collective redundancy regime.

Although a collective redundancy process is required if there is a proposal to dismiss 20 or more employees at one establishment, the new Code will apply regardless of the number of employees involved in the “fire and rehire” process.  

However, the Code will not apply where there is a genuine redundancy situation for the purposes of the definition in the Employment Rights Act 1996 (in other words, a particular role is no longer needed, or there is reduced need for a particular type of work, and the employee(s) are not being replaced).