What is fire and rehire?
Dismissal and Re-Engagement, or Fire and Rehire as it is more commonly known, is the practice of dismissing an employee and then offering them a new employment contract, on new terms, as a way to make changes in their terms and conditions if the employee has not agreed to those changes. This is an established practice which allows employers to make changes without consent. The practice has come under scrutiny in recent years following reports of misuse by employers using the threat of dismissal and potential unemployment as a tactic to push changes through.
Although there is no ban on the practice, it does carry serious risk of costly claims, for example breach of contract or constructive dismissal claims, and wider commercial repercussions. Employers must recognise that fire and rehire creates a high risk of reputational damage and an adverse effect on employee relations.
Labour plans to ban fire and rehire, except in limited cases where it is necessary for a business to remain viable and to preserve the workforce, as the government recognises that employers sometimes have no choice but to restructure their business and so it proposes strengthening existing laws and issuing a strengthened code of practice so that any changes can only be made following a fair and transparent consultation process based on dialogue and common understanding between workers and employers.
What changes does the new Code of Practice make?
From July 2024, for England, Wales and Scotland, the UK’s first Statutory Code of Practice on Dismissal and Re-engagement will come into effect. The code imposes an expected procedure on employers wishing to use fire and rehire. The code demonstrates that this practice should be a last resort following meaningful consultation with employees.
Before employers raise the prospect of dismissal and re-engagement with their workforce, the Code requires them to contact Acas for advice.
The code encourages employers to act responsibly and to give as much notice as possible if deciding to go ahead with this method. It also recommends that employers should consider giving employees more than their contractual notice entitlements, as well as offering practical support such as counselling.
Where will the code apply?
The code will apply wherever an employer is considering making changes to the terms and conditions of one or more employee’s contracts and where, if that employee does not agree to the changes, they envisage dismissal and re-engagement as an option.
It does not apply where the employer only envisages dismissing an employee by reason of redundancy.
How can we help?
If you are an employee who has been offered dismissal and re-engagement and wish to know your rights, or if you are an employer considering using this practice to make changes to an employee’s contract and wish to take advice before going ahead, contact Fisher Jones Greenwood LLP – Dispute Resolution Team at [email protected] or call 01245 584523.