A New Code For “Fire & Rehiring” Employees
Key Contact: Claire Knowles
Author: Laura Spence
Why is this happening?
In March 2022, P&O Ferries attracted public outrage following their decision to fire 800 workers via a video message without any consultation. In response to this, the Government has published a draft code on “fire and rehire” practices (otherwise known as termination and re-engagement) which sets out expected standards when employers need to implement legitimate and proportionate contractual changes. The Code provides guidance on introducing new terms amicably, or if necessary, terminating employment contracts and re-engaging on the new terms. While not legally binding, breaches of the Code could result in an uplift in claimant compensation in tribunal proceedings by up to 25%.
The key takeaways from the Code are as follows:
1. Reconsidering the proposed change(s)
The first step is to reconsider! The purpose of the code is to ensure employers take all reasonable steps to explore alternatives to dismissals. Fire and rehire should be a last resort, therefore, when implementing new terms of employment, due consideration should be given throughout as to whether it is necessary. If the changes are not welcomed by employees, employers should re-examine their business strategy in light of the potentially serious consequences the changes may have for the affected employees. Review is at the heart of the Code and should be returned to at regular intervals.
2. Sharing information
The employer should share as much information as they can regarding the change of terms with the relevant employees. Useful information to share which could help reach consensus and build trust between the parties includes the objectives of the business, the nature of the changes, timeframes, and other options which have already been considered. The sooner the information is shared, the better!
Consultation should be honest and transparent, both parties need to listen to each other and respond in good faith. The Code makes it clear that whilst consultation is a time for negotiation, threat of dismissal is not to be used as a negotiation tactic. A longer consultation period allows more in-depth discussions to be had, a deeper understanding and a thorough exploration of alternative options.
If an agreement is not reached
If no agreement has been reached, and no term from the employment contract can be relied on to implement the change, the employer may then (as a last resort) consider terminating and re-engaging. Legal advice is always recommended before implementing a termination and re-engagement strategy as there are many employment law factors to consider and the exercise is easy to mismanage.
Practical steps when implementing a change via fire and rehire
- Put the changes in writing to the employee and provide accurate notice of termination.
- Ensure that re-engagement takes place promptly after termination.
- Issue the employee with a new contract or section 1 statement.
- Maintain good communication as the employees adapt to the change.
- Invite the employees to provide feedback and consider mitigating concerns to minimise conflict.
- For multiple proposed changes, consider a phased implementation and review strategy.
- Consider support such as relocation assistance, career coaching, and counselling.
The draft Code can be reviewed here: Code of Practice on Dismissal and Re-engagement. For any queries in relation to implementing new terms of employment, please contact a member of the Employment team