Fire and rehire: draft Code of Practice published
The practice of “fire and rehire” or the technical term, dismissal and re-engagement on new (usually less favourable) terms) has become increasingly controversial over the past few years. It can cause conflict between employers, employees and trade unions as well as reputational harm and the risk of legal claims.
Because of these concerns, the Government issued a draft Code of Practice on dismissal and re-engagement for consultation on 24 January 2023 and the consultation period ended on 18 April 2023.
The Government published its response to the consultation and an updated draft Code of Practice on 19 February 2024.
The purpose of the Code is to ensure that:
- An employer takes all reasonable steps to explore alternatives to dismissal and engages in meaningful consultation with a view to reaching an agreed outcome with employees and/or their representatives.
- An employer does not raise the prospect of dismissal unreasonably early, or put undue pressure on employees by threatening dismissal where this is not, in fact, envisaged. In addition, that dismissal and re-engagement is only used as a last resort.
The Code applies regardless of the number of employees affected, or potentially affected and regardless of the employer’s reasons for wanting to make changes to the terms and conditions of employment.
There is no standalone right for an employee to bring a claim for an employer’s failure to follow the Code. However, the Code is admissible in evidence in certain proceedings and the Employment Tribunal can increase or reduce an award by up to 25% if the employer or employee has unreasonably failed to comply with it.
What practical guidance does the Code provide?
Information sharing and consultation
- Information-sharing and consultation are intended to be viewed as an ongoing process, not a single event. Information should be provided as early as reasonably possible and it is good practice for the employer to provide the information in writing.
- Employers should share as much information regarding the proposals as reasonably possible to enable employees or their representatives to understand the reasons for them and to be able to ask questions and make counter-proposals. It is recognised however, that employers may not be able to provide commercially sensitive or confidential information. In those circumstances, the employer should explain its reasons as fully as reasonably possible.
- All employees who might be affected by the proposals should be informed and consulted through their recognised trade union if there is one, or through their employee representatives or individually. It is important not to forget about employees who are away from the workplace, for instance on sick leave or family friendly leave.
- The employer should consult for as long as reasonably possible in good faith, with a view to reaching an agreed outcome even if they think that it’s unlikely the employees and/or their representatives will agree to the proposed changes.
- As for what information should be provided, this would include information about what the proposed changes are, who will be affected by them, the business reasons for the proposed changes, anticipated timescales and reasons for those, any other options that have been considered and the proposed next steps.
- To enable meaningful consultation, the parties should engage with each other openly and in good faith. They should genuinely consider the points that are put forward and the employer should also genuinely consider any reasonable alternative proposals. The aim is to reach an agreed outcome.
- As for the length of the consultation, this should be for as long as reasonably possible as this will enable the parties to have a more in-depth discussion and a deeper understanding of the rationale for the proposals and the reasons for any objections. This may well increase the chance of an agreement being reached. However, it is necessary to consider the circumstances and the nature of the proposed changes. The Code gives the example of a business suffering a financial crisis which would result in a shorter consultation process and with less information provided.
Raising the prospect of dismissal and re-engagement
- Where an agreed outcome cannot be reached and the employer intends to choose the option of dismissal and re-engagement, the employer should be clear about that and not do this unreasonably early as that would be detrimental to trying to reach an agreement. Further, the threat of dismissal should not be used as a negotiating tactic to put undue pressure on employees where the employer does not actually intend to dismiss in order to achieve its objectives.
- Interestingly, the Code states that the employer should contact Acas for advice before raising the prospect of dismissal and re-engagement although Acas may be contacted by any party wherever the Code applies.
Next steps
If no agreement has been reached and the employer’s view is that it still needs to implement the changes, the Code states that the employer should re-examine its proposals, taking into account the feedback received so far and whether there are any other alternatives to achieving the employer’s objectives. If it still decides the changes need to be made and there is no agreement, one option is for the employer to impose the changes unilaterally. There are significant legal risks with this approach in particular, an employee resigning and bringing a constructive unfair dismissal claim.
Where the employer is considering dismissal and re-engagement, this should be treated as a last resort and the employer should:
- Give as much notice as reasonably practicable of the dismissal and must give the employee their contractual or statutory notice period as a minimum.
- Consider whether more time would be helpful for the employee to make arrangements to accommodate the changes, for example, a change in working hours may need changes to childcare arrangements.
- Decide whether there is any practical support it can offer and the Code refers to relocation assistance, career coaching or counselling for emotional support as examples.
- Consider reviewing the changes in the future to establish whether they are still necessary.
- Consider introducing the changes on a phased basis if more than one change is being implemented.
- Set out the new terms of employment in writing.
- Re-engage the employee as soon as reasonably practicable and invite feedback about the changes from employees as they adapt to them, and consider what might be done to mitigate any negative impacts on employees.
Comment
The Government says that the Code shows it is “taking action to tackle fire and re-hire practices by balancing protections for workers with business flexibility”.
The TUC on the other hand says that the Code “lacks bite” and more robust legislation is needed to protect people at work.
Certainly, there is some concern that the potential 25% uplift in compensation is not enough of a deterrent for employers wanting to fire and rehire.
The Code now needs to be approved by both Houses of Parliament and will be brought into effect in 2024, possibly the summer.
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