Fire and Rehire – Keep Watching this Space
Key Contact: Claire Knowles
Author: Conrad Hazlitt
Employers wishing to make detrimental changes to employees’ terms and conditions will often, in the absence of the affected employees agreeing to those changes, dismiss and offer to re-engage on the detrimental terms. This controversial approach to achieving contested contractual changes, known as ‘fire and rehire’, has attracted a lot of political attention with many calling for legislative intervention.
Back in January 2020, and perhaps in response to these calls, the government asked ACAS to launch a “fact-finding” investigation into the practice. The resulting ACAS report, published on 08 June 2021, described the practice as “longstanding” and “widespread across a wide range of industries” but significantly reported no general consensus on how to bring about useful reform. Nevertheless, many opposition MPs continued to call for fire and rehire to be outlawed. In October 2021, the government blocked a proposed new law aimed at curbing the practice and in doing so expressed concern that legislative reform risked unintended adverse consequences. Whilst ruling out introducing “heavy-handed legislation” on fire and rehire, the government did however do two things:
- It reiterated its exiting commitment to extend the period required to break continuity of service from one week to four weeks.
- It went back to ACAS again and this time asked them to produce clearer guidance aimed at helping employers explore all options before resorting to fire and rehire.
Regarding 1, at the time of writing no such change has yet been brought in and the timescale for this development is not currently known.
Regarding 2, on 11 November 2021, ACAS responded by publishing updated Advice on changing employment contracts. The updated advice does not of course directly affect the current legal position, but Employment Tribunals may nevertheless consider it if asked to determine the overall fairness of a dismissal. ACAS advise that employers should fully consult with their workforce and make every effort to reach agreement on any contractual changes. ACAS’ updated advice also contains practical tips for employers on how to keep discussions constructive where reaching agreement is providing difficult. Their tips include:
- taking time to understand employee views;
- where appropriate, offering to introduce the changes gradually, rather than all at once;
- where appropriate, offering to change senior managers’ contracts in the same way; and
- exploring whether some proposed changes could be achieved in other ways.
In spite of all of the above, although the practice is certainly not without risk, if handled with care fire and rehire generally still remains an effective option for well-advised employers to bring about contested employee contractual changes. The political signals do show however that this could soon become a fast-moving area of law. As the Acuity employment team have been saying for some time now, keep watching this space…
If you would like support varying employment contracts within your business, our Employment Team are standing-by to assist.
