401: Guidance and Code on ‘fire and refire’ published

This practice attracted significant attention during the pandemic, as well as in March 2022 when P&O Ferries dismissed around 800 employees without consultation and replaced them with cheaper agency staff. On 24 January 2023, the Government published a consultation seeking views on a draft statutory Code of Practice on Dismissal and Re-engagement (also known as ‘fire and rehire’). If approved by Parliament, the Code would apply whenever employers envisage that dismissal and re-engagement on new terms may be necessary if proposed changes to terms and conditions are not agreed.

The Code stresses that changing terms and conditions through dismissal and re-engagement should be considered an absolute last resort due to the potentially serious consequences and unreasonable failure to follow the Code could result in a 25% uplift in compensation in relevant claims.

Employers should consider the following points from the draft Code of Practice:

• failure to follow the Code will not in itself amount to a breach of a legal obligation. However, Employment Tribunals will take the Code into account where relevant to any proceedings and may increase an award of compensation by up to 25% if the employer has unreasonably failed to comply;
• the Code will apply regardless of how many employees are affected or potentially affected by the employer’s proposals, and regardless of the reasons for seeking the changes. It also applies in addition to other statutory obligations to inform and consult in collective redundancy or TUPE situations, for example;
• there are no set time limits for the consultation process. Timing will depend on the circumstances, but the Code notes that a longer consultation period will allow for more detailed discussion and increase the likelihood of agreement. Information on the proposals should be provided as early as possible;
• employers must be honest and transparent about the fact that they are prepared, if negotiations fail, to unilaterally impose changes or dismiss employees. However, employers must never use the threat of dismissal only as a negotiating tactic;
• the Code sets out detailed steps for the information and consultation process which vary according to how the contractual variations are to be implemented, for example, by unilaterally imposing the new terms or by means of dismissal and re-engagement. Once it is clear that employees will not accept new terms without negotiation, employers must share as much information as is reasonably possible and engage in meaningful and good faith consultation with trade unions, other employee representatives or individual employees. This must include genuine exploration of whether alternative proposals suggested by employees would be workable. Employers must continue to reassess their proposals and all relevant factors as discussions and consultations progress; and
• employers must also take into account the potential negative consequences of acting unilaterally, including reputational risk, loss of staff, and damage to morale, productivity, and industrial relations.

The process outlined in the draft Code clarifies and gives greater legal force to existing accepted standards for changing employees’ terms and conditions, much of which is already set out in Acas guidance. This process will be familiar to employers who have carried out collective redundancy exercises.

The deadline for responses is 18 April 2023, and once all responses have been considered, the finalised Code will be brought into force when Parliamentary time allows.

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