New statutory code of practice for “Fire and Rehire”

A statutory code on the practice of ‘fire and rehire’ will clamp down on controversial tactics used by employers who fail to engage in meaningful consultations with employees.

On (Tuesday 29 March) Labour Markets minister Paul Scully announced a new statutory code on the practice of ‘fire and rehire’. The code will also clamp down on controversial tactics used by unscrupulous employers who fail to engage in meaningful consultations with employees.

The practice of ‘fire and rehire’ refers to when an employer dismisses a worker and rehires them on new, less-favourable terms. The government has always been clear that using 'fire and rehire' as a negotiating tactic is completely unacceptable, and we expect companies to treat their employees fairly.

However, considering the disgraceful actions of P&O Ferries in sacking 800 workers on the spot without consultation, the government recognises the need for greater clarity for employers. The new Statutory Code of Practice will detail how businesses must hold fair, transparent, and meaningful consultations on proposed changes to employment terms.

This is what P&O Ferries failed to do - as its CEO made clear, the company never had any intention of consulting workers, and they are now rightly facing backlash from workers, the public and the government.

'Fire and rehire' tactics are often used when employers want to change the terms and conditions of their workers. This can take place when a company is in financial distress and needs to cut costs to stay in business.

In November 2021, Acas – the Advisory, Conciliation and Arbitration Service - published guidance for employers considering making changes to employment contracts, making clear that 'fire and rehire' should be an option of last resort and that employers should first have made all reasonable attempts to reach agreement through full consultation.

The government is now going further, by developing a new Statutory Code of Practice, which will clarify and give some legal force to government expectations that employers should behave fairly and reasonably when seeking to change employees’ terms and conditions.

The code will act as a deterrent, particularly to those employers seeking to use the threat of 'fire and rehire' as a negotiation tactic. When claims are raised to the employment tribunal, the judge will refer to statutory codes when deciding the level of award an employee is entitled to. The most common statutory code is, arguably, the Acas Code of Practice on Disciplinary and Grievance Procedures. However, the new fire-rehire Code will lay new consideration for employment tribunals to analyse. This means an employer may face paying out up to 25% more in compensation for not following the process set out in the Code. It is hoped this will act as a further deterrent to employers, to prevent them from abusing the fire-rehire process and treating employees unfairly.

The government has always stood firm against businesses seeking to use fire and rehire practices, which should only ever be considered as an absolute last resort if changes to employment contracts are critical and voluntary agreement is not possible.

Employers must recognise that this approach creates a high risk of legal claims, reputational damage, and an adverse effect on employee relations.