You’re fired (and re-hired)! Recent lessons on how not to vary employment contracts

You’re fired (and re-hired)! Recent lessons on how not to vary employment contracts

Key Contact: Claire Knowles

Author: Adam McGlynn

In one way or another, businesses have spent the last year adapting. Some industries have been presented with unexpected opportunities for growth and innovation, while other industries have fought for survival amid uncertainty and business restrictions. For businesses considering redundancies, the Coronavirus Job Retention Scheme (CJRS) has been a lifeline for retaining talent. However, as restrictions ease and the CJRS begins to withdraw, employers are looking to clarify the terms and conditions that will apply to employees moving forward.

As working arrangements change, variations to employment contracts have been, and will continue to be, necessary. The ideal outcome is for employees to agree to proposed changes voluntarily, perhaps because the proposed arrangement is mutually beneficial. Where an employee is more reluctant to agree, however, the option may be open to the business to terminate their contract and offer re-engagement on new terms, provided the proposed changes pursue sound business reasons. This process is sometimes called ‘termination and re-engagement’ or ‘fire and re-hire’.

When pursuing a termination and re-engagement exercise, it is important to remember that the dismissal itself must still be lawful, despite the hope that the employee will accept re-engagement on the terms proposed. A recent reminder of this can be found in the case of Khatun v Winn Solicitors where the business had sound business reasons for seeking a contractual variation, and had a potentially fair reason to dismiss Ms Khatun for rejecting the variation, but failed to follow a fair process when doing so. Ms Khatun was allowed 24 hours to accept a variation to her employment contract or she was told she would face dismissal. Her rejection of the variation was followed by a short informal conversation with the employer before being dismissed the next day without any formal correspondence. As Winn Solicitors failed to act reasonably, and had not applied a fair and reasonable process, Ms Khatun was successful in her claim for unfair dismissal.

Debate surrounding the future of the termination and re-engagement process has recently hit the headlines with other organisations, such as British Gas and British Airways, being publicly criticized for their practices. British Gas were engaged in a nine-month dispute over employee working hours before pursuing a termination and re-engagement exercise that resulted in 500 employees refusing to return on the terms offered. British Airways also faced media criticism when proposing to re-engage its non-pilot workforce on reduced pay following the detrimental impact of Coronavirus restrictions. In response to rising concerns, ACAS have published a report to assist the Department for Business, Energy and Industrial Strategy in its consideration of the issue, however, the Government are yet to announce any proposed reforms.

Watch this space for further updates on possible termination and re-engagement reform and if you would like support varying employment contracts within your business, our Employment Team are standing-by to assist.

Talk to the Employment Team

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