Fire and rehire practices under further Government scrutiny

The practice commonly known as  “fire and rehire”, involving the dismissal and re-engagement of employees on new terms has come under further adverse scrutiny. A Private Member’s Bill, seeking to discourage such practices, attracted attention in the media and ACAS published guidance for employers, at the request of the Government.

What is the new UK Government guidance on firing and rehiring employees?

The Government blocked the Bill, preferring to focus on the new guidance. The guidance states that when contract changes cannot be agreed upon, employers should thoroughly explore all other options before deciding to dismiss and re-engage employees. Firing and rehiring should only be considered as a last resort given that it is an “extreme step”. The guidance also highlights the legal and other risks to employers, including the risk of reputational damage, strikes and retention challenges, as well as immediate and long-lasting damage to trust and working relationships.

Fire and Rehire

During the pandemic, many employers made changes to the terms and conditions of employee contracts to access the furlough scheme or enable the survival of the business through economically unprecedented times. Some employees were willing to agree to those changes, keen to avoid a redundancy situation, however, now that the pandemic has ended, they may no longer be as willing as they were to accept changes to their contracts.

Why do employers fire and rehire their employees?

In situations where employees are unwilling to agree to employment contract changes, an employer will have to give lawful notice to end the contract and offer a new contract under the new terms, effectively firing and rehiring those concerned. Provided the employer has a sound business reason for making the change, the dismissal is likely to be reasonable, if the employer has gone through a fair procedure, including detailed consultation before dismissing the employee.

Firing and rehiring were brought into the spotlight recently by the British Gas case, where employees were given the notice to end their existing contracts and then asked to agree to new terms for lower pay and longer hours. Hundreds refused and so their employment was terminated. In another recent case involving Khatun v Winn Solicitors, the dismissal of a solicitor for refusing to accept new terms during furlough was also held to be unfair.

What do employers need to consider before they fire and rehire their employees?

Employers in the UK who are contemplating dismissal and re-engagement should carefully evaluate the risks before taking any action, taking into account the ACAS guidance, case law principles and the need for effective, genuine and constructive consultation and evidence for sound, good business reasons. In addition, employers in Northern Ireland should refer to the LRA guidance and code of practice in relation to dismissal. They should also remember the requirement to follow the statutory dismissal procedures when contemplating the dismissal of fewer than twenty employees, so as to avoid potential automatic unfair dismissal claims.

ACAS Chief Executive, Susan Clews, said: –

“Our new advice is clear that fire and rehire is an extreme step that can seriously damage working relations and has significant legal risks for organisations. Employers should thoroughly explore all other options first and make every effort to reach an agreement with staff on any contract changes. Organisations that consult with their workforce in a genuine and meaningful way about proposed changes can help prevent conflict at work and stay within the law.”

A link to the ACAS guidance can be found here:

Feel free to get in touch with our solicitors if you need any further guidance on the best way to go about changing the terms and conditions of employee contracts.

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