What is “fire and re-hire”?

Fire and re-hire is the popular name given to a particular kind of dismissal, which is lawful under the Employment Rights Act 1996 (s.98). Formally, it is the practice of forcibly changing employee terms and conditions via a process of dismissal and re-engagement, taking advantage of the “some other substantial reason” for dismissal. 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.

Where this process is followed, the usual fair and reasonable test will apply to any dismissals. As such, employers are still expected to follow a process of consultation with staff even under the existing law, and risk an unfair dismissal if they fail to do so, such as in the case of Khatun v Winn Solicitors Ltd [2021], where a successful claim against an employer was brought for failing to follow a fair and reasonable procedure during a fire and re-hire dismissal.

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.

The purpose of the Code is to ensure that an employer takes all reasonable steps to explore alternatives to dismissal and engages in meaningful consultation with trade unions, other employee representatives or the individual employees in good faith, with an open mind, and does not use threats of dismissal to put undue pressure on employees to accept new terms, instead of seeking an agreed solution.

Even if the employer considers that the employees or their representatives are unlikely to agree to the proposed change, the employer should continue to consult and negotiate for as long as possible in good faith.

What happens now

The Code now needs to be considered by Parliament and gain its approval. It is expected to come into force in summer 2024. Employers should not have to change too many of their processes to be compliant with the Code, but with the danger of an uplift of up to 25% for not following it, reviewing them thoroughly prior to the introduction of the Code is recommended. New documentation may also be needed, which should be highlighted in the review.

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