D-BRIEF – Employment & Pensions Blog: Draft Code of Practice Dismissal and Re-engagement – Government Consultation

In the past few years, the practice of firing and rehiring employees has come under scrutiny and has been widely reported on in the media.

In March 2022, in a controversial move, P&O Ferries decided to sack 786 workers without notice, with some staff finding out via a pre-recorded video message. The workers were replaced with foreign agency workers saving the company money as they were paid less than minimum wage in the UK. Whilst not technically a “fire and rehire” situation as the workers were not rehired, in response to this the Government announced that it would introduce a new statutory code of practice on the use of fire and rehire practices.

What is ‘Fire and rehire’?

This practice, also known as dismissal and re-engagement, is used where an employer wishes to make changes to employment contracts, but these changes are not agreed with employees. The practice involves employees being dismissed under the terms of their existing contract, and at the same time are made an offer to rehire them on a new contract with amended terms. For more information on this process and the legal implications please see our blog: D-BRIEF – Employment & Pensions Blog: Fire and Rehire

Code of Practice on Dismissal and Re-engagement

The Government has just launched a consultation on the introduction of a new statutory code of practice on dismissal and re-engagement. The code is intended to promote good industrial relations and provide practical steps for employers, with the intention of ensuring dismissal and re-engagement is a last resort, once fair and transparent consultation has taken place.

For the purpose of the consultation, a draft version of the code has been published which will be issued under s.203 of the Trade Union and Labour Relations (Consolidation) Act 1992. The draft code provides that employers will need to discuss with employees (and/or unions) any proposed changes to terms and conditions, making sure they are aware of the employer’s objectives and the nature of the proposals. The consultation should be meaningful and open in sharing information, to try and come to a consensus over the changes. The code also states that it is important employers are honest and transparent that if negotiations fail, they are prepared to dismiss employees to force the changes through. This has to be finely balanced against the requirement not to use the threat of dismissal as a negotiating tactic.

The code provides that where agreement cannot be reached, employers are advised to review their business strategy to see if there is a room for compromise. In particular, taking into account the potentially serious consequences for employees, the reputational risk and damage to industrial relations. The idea behind the code is that dismissal and re-engagement becomes a last resort once the above process has been undertaken but changes to the terms and conditions of employment are still required. If an employer fails to comply with the code, then an employment tribunal will take this in to account during any unfair dismissal claims and it can result in an uplift to an award of up to 25% to reflect unreasonable non-compliance.

If the code is implemented in its current form, it will be important for employers to take account of this when considering potential changes to terms and conditions of employment that may be implemented by dismissal and re-engagement.

Devonshires will be responding to the consultation before 18th April 2023.  if you have any comments you wish to be included in our response, please contact a member of the Employment Team.

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