The ACAS Code of Practice on fire and rehire (the Code) is expected to come into effect in July 2024.
Fire and rehire is the practice of dismissing an employee and offering them a new employment contract on different terms as a way of changing the terms and conditions if the employee did not originally agree to those changes.
This is formally known as dismissal and re-engagement and is an established employment practice for changing terms and conditions of employment in the absence of consent. An employer cannot generally make unilateral changes to an employment contract. However, the employer may decide to give notice to terminate the contract and offer the employee a new contract on different terms. This practice could count as a dismissal of the employee under both unfair dismissal and collective redundancy laws.
Employers must therefore act reasonably, ensuring that the reason for the termination is fair, and correct procedures are being followed. If twenty or more employees are being dismissed, this may also trigger collective consultation obligations under redundancy law.
Fire and rehire has come under scrutiny in recent years following reports of misuse by employers using the threat of dismissal and potential unemployment as a tactic to force changes to terms and conditions. The practice is also reported as causing conflict between employers, employees and trade unions, detrimentally impacting industrial relations.
The ACAS Code of Practice on fire and rehire:
- The Code is intended to provide practical guidance for employers who are proposing to make changes to employees’ terms and conditions where agreement cannot be reached.
- It recognises that dismissal and re-engagement may be needed but sees this as a last resort. The emphasis is on employers taking all reasonable steps to explore alternatives and to engage in meaningful consultation while not raising the possibility of dismissal unreasonably early or using it as a threat. If agreement on a way forward cannot be reached through consultation, the employer is required to re-examine its proposals and contact ACAS for advice before raising the prospect of dismissal and re-engagement.
- It applies wherever an employer is considering making changes to the terms and conditions of one or more employees and where, if the employee, or their representative, does not agree to the change, they envisage dismissal and re-engagement as an option.
- It applies regardless of how many employees are affected and irrespective of the business rationale behind the proposed changes.
- The Code does not apply where the employer only envisages dismissing an employee by reason of redundancy.
- Where there is a recognised trade union, the information and consultation should be via that trade union. Where a trade union is not involved, the employers should inform and consult with either (i) an existing body of representatives; (ii) a newly elected body of representatives; or (iii) the employees directly. The employer has a choice over which of these is most appropriate but must act reasonably and comply with any legal obligations.
- The ACAS Code encourages early information sharing, and the provision of as much information on the proposals as is reasonably possible to help understand the proposed changes and the reasons for them.
- It suggests that details be provided of what the proposed changes will be; who will be affected; the business reasons for the proposals; anticipated timings and the reasons for this; any other options that have been considered; and proposed next steps.
- The Code does not require information to be given in writing, but it suggests it is good practice to do so.
- It states that consultation should not be a box ticking exercise, but rather a two-way open-minded exchange of views, entered into in good faith with a view to reaching an agreement on the way forward. This means employers should genuinely consider any proposals or alternatives proposed by the employees or their representatives.
- It does not specify a minimum period of consultation, but it should be long enough as reasonably possible to satisfy the requirement for meaningful consultation. However, employers should keep in mind that if 20 or more employees are impacted, then collective dismissal rules may also apply which do have mandatory timescales.
- The Code also states that where consultation has not resulted in an agreed way forward, but the employer still wishes to implement changes to terms and conditions, the proposals should be re-examined, taking account of feedback received during consultation, but also considering factors such the impact on the reputation of the organisation as well as industrial relations, the possibility of losing valued employees and the risk of legal claims.
- It urges employers to contact ACAS for advice before raising the prospect of dismissal and re-engagement.
- According to the Code, collective consultation obligations apply where the employer “proposes to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less”. “Dismiss as redundant” has a wide meaning to include any dismissals not related to the individual employee, so extends to where there are proposed dismissals and re-engagement for the purposes of changing terms and conditions.
- It does not override an employer’s collective consultation obligations. So, where the test is met, employers will need to comply with those requirements as well as the Code, and the Code makes this clear.
Any failure to follow the Code does not in itself give rise to any legal claims, but an Employment Tribunal can take compliance with the Code into account in relevant proceedings, for example when assessing the fairness of a dismissal.
In addition, the Employment Tribunal will be given power to uplift or reduce compensation by up to 25 percent where there is unreasonable non-compliance with the Code. The uplift will only apply to certain types of claims as specified in the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA), which includes unfair dismissal.
Feel free to contact us if you are facing a “fire and rehire” situation in your workplace and you need legal advice regarding how you should proceed.
