P&O’s mass fire and rehire of employees in 2022, shone a spotlight on exactly how companies use this practice. It sparked a huge show of public concern and prompted the Government announce it would draft a new code of practice for Dismissal and Re-engagement, commonly known as fire and rehire and seek public consultation on the code. The Government has confirmed that the new statutory code of practice on Dismissal and Re-engagement will be brought into force by July 2024, subject to Parliamentary approval.
When employers are unable to reach agreement with employees over changes to the employee contract, they may consider using dismissal and re-engagement to impose the changes. It is a controversial practice which can negatively affect industrial relations, but for businesses in financial difficulty, changing terms of employment can be key to the survival of the business.
The new code provides guidance to employers considering fire and rehire when looking to change employee contract terms. Regardless of the number of employees that might be affected and the reasons for seeking changes to the employee contract, the code requires employers to:
- consult with employees;
- explore alternative options without raising the prospect of dismissal unreasonably early;
- not use the threat of dismissal as a negotiating tactic to put pressure on employees where they do not envisage dismissal; and
- only use fire and rehire as a last resort.
Several changes were made to the draft code following the consultation stage, including:
- clarification that the code will only apply if employers are considering both redundancy and dismissal and reengagement (not redundancy alone);
- ACAS should be contacted before raising the prospect of dismissal and re-engagement, although this does not change the general position that ACAS should be contacted whenever the code applies;
- information sharing and consultation comes before requiring an employer to reconsider the need for changes to the contract; and
- an employer will only need to re-examine its plans, not both its plans and business strategy.
Once the code is in force, employers who fail to follow it will not automatically make an organisation or individual subject to an adverse tribunal finding. However, the code will be admissible in evidence in proceedings under the Trade Union and Labour Relations (Consolidation) Act 1992. The tribunal will consider any provision in the code which is relevant.
Also, if an employee brings an employment claim listed in Schedule A2 TULR(C)A, concerning a matter to which the code applies, then the tribunal can increase any award it makes by up to 25%, for an employer’s unreasonable failure to comply. A tribunal will also be able to reduce an award by up to 25% if the employee has unreasonably failed to comply.
The success of such a code for monitoring the use of fire and rehire has been met with some scepticism, but many will see it as a step in the right direction to help prevent inappropriate use of the tactic, whilst balancing the need for the process as a last resort to keep businesses afloat.
For help and advice on this topic or related issues, please contact Chris Cook by calling 01727 798089 or emailing chris.cook@salaw.com.
