Government releases revised draft Code of Practice on fire and re-hire

Following a period of consultation in early 2023, the Government has now released a revised draft statutory Code of Practice on fire and re-hire practices, which is part of its efforts to protect workers

The actions of P&O Ferries in March 2022 sparked widespread criticism of “fire and re-hire tactics”. Fire and re-hire is the popular name given to a particular kind of dismissal, which is lawful. It is the practice of forcibly changing terms and conditions by dismissing and re-engaging. It is generally used by employers when they need to make changes to fundamental terms, such as reducing pay. It should not, however, be used to cut hours permanently, as redundancy is the given method for that.

The Code

The Government has said that the goal of the new Code is to take “action against unscrupulous employers” who use fire and re-hire tactics when negotiating with staff. This, the Government claims, “will help to preserve security and opportunity for those in work, as part of our plan to grow the economy”. It will be applicable to all employer processes that are intended to achieve proposed changes to employee terms and conditions, regardless of the number of employees affected. It will not apply to redundancy situations unless an element of redundancy consultation involves forced changes to terms and conditions.

The Code will not ban the practice, but it will set out expectations on employer behaviour during processes seeking to change employee terms and conditions, with the aim of ensuring that employees are “properly consulted and treated fairly”. The Code itself imposes no legal obligations, and a failure to observe it does not, by itself, render employers liable to proceedings. But it will be admissible in evidence in proceedings before an employment tribunal, and any provision of the Code which is relevant to those proceedings must be taken into account by the tribunal.

In addition, if an employee brings an employment tribunal claim, and the claim concerns a matter to which this Code applies, then the tribunal can:

• increase any award it makes by up to 25%, if the employer has unreasonably failed to comply with the Code
• decrease any award by up to 25%, where it is the employee who has unreasonably failed to comply.

Will employers still be able to do fire and re-hire?

What is fire and rehire?

Do I have to give notice to fire and re-hire?

Expectations set out by the Code

Below are the expectations set out under the Code that employers will need to follow. Under the Code, employers will be expected to explore alternatives to dismissal and re-engagement and have meaningful discussions with employees or trade unions to reach an agreed outcome. Employers must not use threats of dismissal to pressurise employees into accepting new terms. They should also not raise the prospect of dismissal unreasonably early or threaten dismissal where it is not envisaged. Other expectations under the Code include:

• communicate to employees that the organisation is considering changing the terms and conditions in employees’ contracts
• where employees indicate that they don’t agree to the changes, re-examine plans for changes to employment contracts in light of feedback from consultation. Where this is necessary, employers will have to consider:

             a. the objectives they are seeking to achieve

             b. the negative consequences of acting unilaterally

             c. whether their plans carry any risk of discriminatory impacts

             d. whether there are any existing contractual clauses they could reasonably rely on, such as mobility clauses.

• consider what information could be shared with employees or their representatives which might help reach consensus
• give as much notice as possible of the dismissal and consider a phased introduction of changes and any other practical support
• set out new terms of employment in writing
• re-engage employees as soon as possible to preserve their continuity of service
• continue to review the need for the change and monitor the impact of the changes over time.

The Code now needs to be considered by Parliament and gain its approval. It is expected to come into force in summer 2024.