Fire and re-hire - time for change?

The new Code will detail how employers must hold “fair, transparent and meaningful consultations on proposed changes to employment terms”, including the practical steps that employers should follow.

Importantly, the government has stated that a court or Employment Tribunal will be able to take the Code into account when considering relevant cases, including unfair dismissal. The courts will also have the power to apply an uplift of up to 25% of an employee’s compensation if an employer unreasonably fails to comply with the Code where it applies.

Fire and re-hire practices (more traditionally known as dismissal and re-engagement) are used by employers to seek to change terms and conditions of employment when agreement cannot be reached with workers.  Employers are at risk of unfair dismissal claims, claims for failure to inform and consult, and even criminal liability if existing employment laws are not followed.

The practice, whilst legal, has always been controversial but has become even more so recently. The issue was debated in Parliament last year, and the government stated in February 2022, prior to the P&O Ferries dismissals, that it had no plans to legislate to prevent the practice. The government has had to re-think this stance in light of the P&O Ferries situation – and whilst it is unclear at present how (or if) the new Code will affect the established legal principles governing fire and re-hire practices (since it is only a Code, albeit a statutory one), it appears that the Code will aim to ensure strict compliance with fair dismissal practices.

Last year, Acas published new guidance for employers looking to make changes to employment contracts, calling fire and re-hire practices an “extreme step that can seriously damage working relations and has significant legal risks for organisations”.  The High Court also looked at the practice recently when granting an injunction restraining Tesco from firing and rehiring employees in order to remove a contractual entitlement to enhanced pay (see our earlier update on this here).