BHJ Fire and Rehire Update – 20 February 2024

28 February 2024

You may recall our update of 26 January 2023 regarding the ongoing consultation/implementation of the statutory Code of Practice on Dismissal and Re-engagement (Hire and Fire – back in the headlines – Backhouse Jones), a process which often arises when an employer is unable to reach an agreement with its employees to proposed changes to their terms and conditions of employment. The consultation came about following a series of larger businesses seeking to dismiss employees and reengage them straight away on less beneficial terms. This was happening during the pandemic and beyond, with the most notable case being that of P&O Ferries (albeit this was not a straightforward fire and rehire scenario).

Since then, an updated Code of Practice (the Code) on Employer’s Firing and Rehiring practices has been published by the government, which still awaits parliamentary approval. Importantly, none of the key provisions referred to in our previous article have altered from the original draft Code published in January 2023. To refresh ourselves of the key provisions and recommendations currently in draft, we have set them out below along with any relevant updates from the latest revised draft Code:

Encouragement for employers to share as much information regarding the proposals as reasonably possible, as soon as reasonably possible. The Code urges employers to consider what information it can provide to employees about what the proposed changes are, who is affected, the business reasons for the change, anticipated timings, other options that have been considered and the proposed next steps. The Code recommends information given to be provided in writing as a matter of good practice. We are of the view this is just as beneficial to the employer as it is to the employee, as there is a paper trail of all the information that has been provided should either party need to refer back for whatever reason;
The Code recommends meaningful consultation. (“What exactly does ‘meaningful consultation’ mean?” I hear you ask) There is no exact definition, but the Code sets out clearly what it expects to see to achieve ‘meaningful consultation’. This includes parties engaging with each other openly and in good faith, genuinely considering the points that are put forward. It expects the employer to be as clear and transparent as possible about its objectives and the nature of its proposals. It also states the employer should continue to consult for as long as reasonably possible as this is more likely to allow for more in depth discussion and deeper understanding of the employer’s rationale, and therefore increasing the likelihood of an agreed outcome. However, there is no minimum time period for consultation as exists for collective redundancy consultations;
Employers should not raise the prospect of dismissal and re-engagement at an unreasonably early stage in the negotiations and especially not as a threat/negotiating tactic to put undue pressure on the employees to accept the new terms, particularly if dismissals are not actually envisaged. The previous draft required employers to contact Acas if they were unable to reach agreement with employees about fire and rehire. However, the latest draft requires employers to contact Acas at an early stage, and in any event before the prospect of dismissal and reengagement has been raised to the employees;
Once it has become clear that an agreed outcome is not being reached and the employer still considers it needs to implement the changes, the Code requires the employer to re-examine its proposal taking into account any feedback, and considering other aspects of the decision including but not limited to the negative consequences of imposing the change, whether there are reasonable alternatives of achieving their objectives and whether the proposals may have a greater impact on some employees than others e.g. those with protected characteristics under the Equality Act 2010;
If changes are agreed, the Code encourages employers to communicate the changes in writing and setting out when the changes will come into effect (giving as much notice as reasonably practicable);
The draft Code states that the practice of dismissing and re-engaging employees as a result of being unable to agree on proposals should only be used as a last resort, and where the employer has participated in a thorough and open information sharing and consultation process, having genuinely considered alternative proposals;
In the event of a fire and rehire scenario, setting aside the obvious need for the employer to ensure the dismissal is fair and lawful, the Code sets out various steps for an employer to consider to ease the transition for the employees into the new terms. It includes giving as much notice as reasonably practicable of the dismissal (complying with the employees notice requirements), considering practical support to be offered to the employee, committing to reviewing changes at a fixed point in the future and consider phasing in the changes gradually. In the original draft of the Code, phasing in changes was an obligation. The new version waters down this obligation to best practice only.

As before, there is no stand-alone claim in an Employment Tribunal for an employer’s failure to follow the Code. However, it will be taken into account by Tribunals in relevant cases (including unfair dismissal claims, which can still be brought even where the employee subsequently accepts reengagement on new terms). Importantly, Tribunals will have the ability to uplift any compensation awarded to the employee by up to 25% if an employer unreasonably fails to follow the Code. A reminder particularly to the larger employers, that this is 25% increase on an award for each successful employee on any claim brought.

If you need advice on varying an employees terms and conditions, or any other employment related queries, please get in touch with a member of our employment team on 01254 828 300, here, or email us at enquiries@backhouses.co.uk.