Employment Law
The government has taken significant steps to address concerns over ‘fire and rehire’ practices and has released its response to the consultation on the draft statutory Code of Practice on Dismissal and Re-engagement.
Background: Dismissal and re-engagement, commonly known as ‘fire and rehire,’ occurs when an employer terminates an employee and presents them with a new contract containing new terms, which are often less advantageous. In March 2022, the government pledged to introduce a statutory Code of Practice on Dismissal and Re-engagement and has now presented an updated draft Code to Parliament for approval.
Key Provisions: The revised Code describes the procedures employers must adhere to when contemplating changes to employment terms, especially when dismissal and re-engagement are a possibility. The Code aims to prevent the premature use of dismissal as a negotiating tactic and ensure that it is employed only as a last resort. Crucially, the Code applies regardless of the number of employees affected and the reasons behind the proposed changes.
Notable Changes: In response to feedback received during the consultation, the government made several amendments to the draft Code.
- Employers should engage in consultation with employees for as long as possible, with no specified minimum time frame.
- Consultation must actively explore alternatives to termination and rehiring, aiming for meaningful discussions with the objective of reaching a mutually agreeable resolution.
- The use of the threat of dismissal as a negotiation tactic to pressure employees into accepting new terms is strictly discouraged, especially when termination is not genuinely contemplated.
- Firing and rehiring should only be considered as a last resort.
- The code does not apply when an employer is solely considering employee redundancy. However, it becomes relevant when an employer contemplates both redundancy and termination with subsequent rehiring as potential options for the same employees.
Non-compliance with the code of practice alone does not warrant a standalone claim against the employer. However, an Employment Tribunal has the authority to enhance awarded compensation by up to 25% if the employer has unreasonably neglected to adhere to the code of practice and the employee pursues a successful relevant claim.
