Fire and re-hire - what does the new code mean?

From time to time, and for a variety of reasons, organisations may need to make contractual changes to employment terms and conditions. The starting point is to communicate and consult to bring about a mutual agreement to change contracts. In some cases, once employees fully understand the need for change; for example, to reduce costs or improve efficiency to enable the business to survive, agreement may be reached. However this does not apply in all cases and employers may then fall back on ‘fire and rehire’ as a way to force changes through.

The statutory Code of Practice on Dismissal and Re-engagement came into force on the 18th of July 2024. This code applies where an employer needs to make contractual changes to an employee’s terms and conditions. The code was brought in with the aim of improving industrial relations since the practise of dismissing and reengaging employees or ‘fire and rehire’ as a means of changing terms and conditions of employment can give rise to conflict and mistrust between employers, employees and trade unions. This code is intended to give practical guidance on dealing with this type of conflict and dispute.

The code sets out that when it comes to changing terms and conditions, fire and rehire should be a last resort.

The code does not apply in cases where the only reason for dismissal is redundancy and a failure to follow the code in itself does not make the employer liable to proceedings. It applies in a similar way to the ACAS Code of Conduct on Disciplinary and Grievance. If an employee brings an Employment Tribunal Claim and the claim concerns a matter to which the ‘fire and rehire’ code applies, then the tribunal can either:

• increase any award it makes by up to 25% if the employer has unreasonably failed to comply with the code or

• decrease any award by up to 25% where it is the employee who has unreasonably failed to comply

The Labour Government has already indicated its intention to replace the statutory code, proposing restricting ‘fire and rehire’ to very limited circumstances e.g. if the alternative is bankruptcy.

Whilst it may not be around for long, let’s examine the key elements of the code as it applies:

• A requirement to consult for as long as reasonably possible in good faith with a view to reaching an agreed outcome. No minimum time period has been specified, but employers are told they should contact ACAS for advice before raising the prospect of dismissal and re engagement.

• Employers must explore the alternatives to dismissal

• If proposals are not agreed, then employers should reconsider feedback from employees and their representatives

• Employers should not use threats of dismissal as a negotiating tactic to pressurise employees into signing new contracts

• Employers should not threaten dismissal if they have no intention of going through with the dismissal

• If dismissal and re engagement prove to be the only way forward, the employer must be clear about it however they should not do so at an unreasonably early stage in the consultation

• Fire and rehire should only be used as a last resort

• The employer should re engage the employee as soon as reasonably practicable

The link to the code is shown here: https://www.gov.uk/government/publications/dismissal-and-re-engagement-code-of-practice/code-of-practice-on-dismissal-and-re-engagement-issued-by-the-secretary-of-state-under-section-203-of-the-trade-union-and-labour-relations-consolidat

If you need advice on changing terms and conditions of employment, Call Joanna on 01827 317092 or email jrobson@pickerings-solicitors.com.

Joanna Robson

Head of Employment Law

Pickerings Solicitors (Tamworth) Limited

01827 317092 or email jrobson@pickerings-solicitors.com