Is There A Future For “Fire & Rehire” Under A Labour Government?

Is There A Future For “Fire & Rehire” Under A Labour Government?

Author: Sam Evans

Key Contact: Claire Knowles

What is “fire & rehire”?

This term refers to when an employer dismisses a worker or employee and offers to re-engage them on new terms or replaces existing workers with alternative workers engaged on new terms. The practice entered the public consciousness in 2022 when the ferry operator P&O Ferries dismissed 800 workers via a video link without any prior consultation.

Whilst this is a particularly egregious example of the practice, there may be instances where it could be legitimate to dismiss and re-engage someone. An example may include where there is genuinely no other alternative, and these changes could rescue the business from potential insolvency.

What changes have been introduced recently?

On 18 July 2024 the statutory Code of Practice on Dismissal and Re-engagement (“the Code”) came into force.  The Code can be reviewed here. The Code aims to set out practical guidance for employers and employee representatives about when they can implement legitimate and proportionate contractual changes. This will now be binding on employers and any breaches of the Code could result in an uplift of up to 25% of any claimant compensation in tribunal proceedings. Conversely, any unreasonable failure by the employee to comply with the Code could lead to a reduction of up to 25%. Therefore, it is essential that employers familiarise themselves with the contents and we at Acuity Law would be happy to provide a detailed advice note on its provisions if this is something that would assist your business.

However, our key takeaways would include the following:

• Fire and rehire should remain a last resort and employers should explore all reasonable steps to explore alternatives to dismissal. If this is truly a last resort, then you may consider terminating and re-engaging but we would recommend you seek legal advice before doing so.
• The employer should engage in open information-sharing with the affected employees and share as much information as they can concerning the changes of terms. Relevant information to provide could include the business reasons for the proposed changes, any options that have been considered as well as any anticipated timeframe for the proposed changes.
• Consultation is crucial and should be both honest and transparent. Any dialogue must be conducted in good faith and the Code expressly states that the threat of dismissal should not be used as a negotiating tactic to unduly pressure any employees. Consultation should ideally facilitate in-depth discussion and a deeper understanding of the rationale for the proposals but only needs to be conducted for as long as reasonably possible. What this means will depend on the nature of the changes and we would be happy to assist with any consultation processes if you require any advice.

How will the new Employment Rights Bill impact fire and rehire?

On 17 July 2024, following the King’s Speech, the new government published a briefing paper setting out what measures its new Employment Rights Bill would contain. The paper confirms that the Employment Rights Bill will seek to outlaw fire and fire save for exceptional circumstances such as when there is no other alternative to preserve the viability of the business, or its workforce, subject to an appropriate dialogue with any workers. Labour has also previously stated that it would look to replace the Code with a stronger version following its election.

Whilst this might introduce some temporary uncertainty, in terms of timescales, the government has committed to “introduce” the bill by 12 October 2024 but it remains to be seen what this means in practice. The term is slightly ambiguous and could mean that the bill will undergo detailed prior consultation before being laid before parliament.

We would therefore recommend that employers prioritise immediate compliance with the Code as it will remain in force until the government opts to make its preferred changes.

If you need guidance on your approach to complying with this new duty and please contact the Employment team at Acuity Law,