New statutory code announced – is the tide turning on the practice of ‘fire and rehire’?

Fire and rehire is the term used in circumstances where an employee refuses to accept new terms and conditions of employment and the employer reacts by dismissing the employee but offering continued employment on the new terms.

In early 2022, we wrote about the case of we wrote about the case of USDAW & others v Tesco Stores Limited, where the High Court granted an injunction preventing Tesco from using the practice of ‘fire and rehire’ in one particular situation. It appeared that may trigger a turning point in the use of the practice. However, the Court of Appeal then overturned the High Court’s decision. While the outcome didn’t effectively outlaw ‘fire and rehire practices’ it created public interest and objection to the practice.

In March 2022, public outrage was sparked again by the mass P&O sackings. Where the ferry company deliberately sought to evade the law by sacking over 700 seafarers without due consultation. So controversial was this move that it shone a light on any practice, including of ‘fire and rehire’, which appears to contravene employees’ rights.

The Government has picked up on the public mood and on 24 January 2023, announced a consultation on a planned statutory code of practice, which seeks to protect employees and clamp down on employers that use the controversial tactic.

This new Code will set out employers’ responsibilities when seeking to change contractual terms and conditions of employment, including an obligation for the businesses to consult with employees in a fair and transparent way when proposing changes to their employment terms. The Code does not directly ban the practice of fire and rehire but implements a number of key guidelines to ensure a fair process is followed when agreeing contractual changes.

While it is not a legal requirement to follow the code, the current proposal indicates that once in force, the Courts and Tribunals will have the power to apply a 25% uplift to an employee’s compensation in an unfair dismissal claim if an employer breached the statutory code.

In short, the proposed Code stops short of banning the practice but should be seen as a very clear deterrent to any employer in planning any change management process.

It is unlikely that the Code will bring an end to the ‘fire and re-hire’ practice and the final version of the Code may be subject to substantial change, but it is evident that the tide on fire and rehire is shifting and the focus must be on genuine consultation and agreement. Termination of employment will become a last resort and not used as a tool to influence the consultation on agreeing terms.

Public sector organisations tend to be unionised and are already open to scrutiny of employment practices so the Code when published will have less impact than in other sectors. An effective consultation process is more likely to result in a positive solution and as importantly maintain a positive ongoing employment relationship. Mutual agreement between the staff and the employer to change the terms and conditions will always be the safest option. The Code has the potential to guide the process and ensure both employer and employee benefit.

The consultation is due to end on 18 April 2023 and the date for the Code coming into force is unconfirmed but likely to be later in the year.

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This article is for general awareness only and does not constitute legal or professional advice. The law may have changed since this page was first published. If you would like further advice and assistance in relation to any issue raised in this article, please contact us by telephone or email enquiries@sharpepritchard.co.uk