“Fire and rehire” code of practice update!

The implementation date for the new statutory code of practice on dismissal and re-engagement (often referred to as “fire and rehire”) was announced in February of this year, as the 18th July 2024. However, recent updates suggest the exact date is unknown but is still expected to be summer this year.

We can still examine the Statutory Code of Practice draft published in February, alongside the most recent updates, in preparation for the codes implementation later this year. If you know “fire and rehire” practices well, skip to the Obligations as an Employer section below.

What is “fire and rehire”?

Fire and rehire has been the topic of political debate in recent years, repeatedly hitting the headlines. It is a phrase that refers to the practice of dismissing an employee and offering them a new employment contract on new terms. Why? Simply, it is a cheat code to making a change to the employees terms and conditions if they would/have not agreed to those changes. It sounds unfair on the employee and yet at the present, dismissal and re-engagement is an established employment practice for changing terms and conditions and completely lawful. Business Minister Kevin Hollinrake said;

“Our new code will crack down on employers mistreating employees and sets out how they should behave when changing an employee’s contract.”

What is the statutory code of practice?

The statutory code of practice outlines the steps for an employer to follow if;

1. The employer is contemplating changes to terms and conditions in an employees contract.

2. The employer envisages they might dismiss the employee facing the changes, if the latter doesn’t agree with the proposed changes.

The new code is intended to provide practical guidance for employers. The code recognises that dismissal and re-engagement may be needed but sees this as a last resort. The code emphasises employers talking all reasonable steps to explore alternatives and to engage in meaningful consultation. The Code also emphasises that dismissal is in no way to be used as a threat to the employee. Acas Chief Executive Susan Clews said:

“Acas offers impartial advice on employment rights and obligations [...] The Government’s new draft Code is clear that employers should contact Acas for advice before they raise the prospect of fire and rehire with employees.”

Although up until now, there was no code for “fire and rehire”employers did have to consider existing dismissal and redundancy laws. Meaning employers had to have a fair reason for the termination of an employees contract and follow a fair procedure and if 20 or more employees were being dismissed, this could trigger collective consultation obligations under redundancy law.

The statutory code is irrespective of the business rationale behind the proposed changes and applies regardless of how many employees are affected.

Legal Status

The code itself is not a legally binding instrument but an employment tribunal can refer to the statutory code if the tribunal relates to a fire and rehire situation. The tribunal can increase any award it makes by up to 25% if the employer has unreasonably failed to comply with the new code. Perhaps surprisingly, the tribunal is equally empowered to decrease any award by up to 25% where an employee has unreasonably failed to comply. But given the nature of the statutory code, the latter is likely to be limited.

The one expectation set out in the Code that captures both employers and employees (and their representatives) is the recommendation that “parties” consult with each other openly and in good faith. Therefore, we expect that an award would likely only be reduced where an employee or their representative acts in bad faith or is unreasonably uncooperative during consultation.

What are employers obligations?

With whom should employers provide information and consult?

Recognised Trade Union

Where there is a recognised trade union, the information and consultation should be via the trade union.

No Trade Union

Where no trade union exists, the employers should inform and consult with either an existing body of representatives, a newly elected body of representatives, or 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.

What information needs to be provided and when?

The statutory code suggests employers will need to provide details about what the proposed changes are. Employers should include: who will be affected, the business reason for the proposals, anticipated timings and the reasons for the timeline, what alternative options have been considered and the proposed next steps. The statutory code does not require this information to be given in writing but it suggests it is best practice to do so.

Although absent in the statutory code, the consultation response recognises that it may not be appropriate to disclose certain commercially sensitive information. However, the consultation response suggests that employers should explain the reasons for any non-disclosure in as much detail as possible if this is the case.

What does meaningful consultation mean?

Consultation should be a two-way candid exchange of views between employer and employee. The aim of consultation should be in reaching an agreed plan on moving forward, which is ideally mutually beneficial to both parties and detrimental to neither. Employers should genuinely consider any proposals or alternatives proposed by the employees or their representatives. There is no minimum consultation period under the statutory code but it should be long enough as reasonably possible to satisfy the requirements of meaningful consultation.

When do employers need to contact Acas?

Under the new code, employers should contact Acas for advice before raising the prospect of dismissal and re-engagement. Why? The rationale is that Acas can help the parties each reach an agreed outcome. Although contacting Acas is not a legal requirement, failure to do so will be acknowledged in a court or tribunal if the latter is considering compliance with the code.

Granite BPO are always happy to offer free advice if you are concerned over anything out of your remit impacting your business, and if you need further consultation we can connect you with the right people.

Get in touch with us on 0208 0363936