Fire and Rehire Practice Code: Key Points for Employers

In July 2024, the Government issued a Code of Practice on Dismissal and Re-Engagement under section 203 of the Trade Union and Labour Relations (Consolidation) Act 1992. So, what is dismissal and re-engagement or fire and rehire? The Code of Practice outlines fire and rehire as, if employees or their representative do not agree with some or all the contractual changes proposed by the employer, the employer may, as a last resort, dismiss the employee before either rehiring them or offering to hire other employees in the same or a similar role. 

The process of fire and rehire does have negative consequences for employers:

1. It can create legal and reputational risks for the employer.
2. It can be harmful to employees’ interests.
3. It can damage the employer’s relationships with its employees, which could lead to disengagement and industrial conflicts.

Code of Practice Guidance

Therefore, it is important that employers make reasonable efforts to explore alternatives to dismissals and engage in discussions with employees and their representatives to reach an agreed-upon outcome. 

The Practice Code seeks to ensure that an employer does not raise the prospect of dismissals early or pressure employees by threatening a dismissal that is unlikely to happen. This means that when an employer intends to fire and rehire employees, they must be clear of their intent, as raising an intent of dismissal can be detrimental to negotiations with employees and representatives. Additionally, the threat of dismissal should not be used as a negotiating tactic to achieve objectives by employers, especially when they do not intend to dismiss employees. 

There is no separate claim for incorrectly dismissing and re-hiring an employee; however, an Employment Tribunal may grant an additional 25% to any reward that someone may get if the employer reasonably failed to comply with the code, or they may reduce an award by 25% if the employee failed to comply with the code. 

Information Sharing and Consultation

Regarding information sharing, the employer should consult for as long as possible in good faith with the employee and their representatives and provide information as soon as reasonably possible to employees and representatives. The information that should be shared includes what the proposed changes are and what new and/or revised changes will look like, who will be affected, business reasons for changes, the expected timing of changes and reasons for the timings, any other options that the employer has considered and the proposed next steps. 

Re-Examining Proposals

Before employers start the fire and rehire process, they need to re-examine all proposals made by employees and representatives before considering fire and rehire, especially considering any feedback they receive from employees and/or representatives. Also, there are some factors which employers may want to consider when re-examining proposals; they include their objectives, the negative consequences such as the risks to their reputation, the damage to the relationship with their workforce or representative trade unions, the potential risk of strikes or industrial action, the risk of losing valued employees, and finally the risk of legal claims and the associated time and cost that comes with claims. And whether its proposal could impact some employees more than others, and finally, the reasonable alternatives they have.

Implementing Fire and Rehire

Once an employer has shared all the relevant information with employees, consulted with them, and re-examined all their alternatives, they can start dismissing and rehiring employees. Before they begin dismissing employees, they must ensure that the dismissal is fair and comply with notice periods either contractually or by law. To ensure the dismissal is fair, the employer must have a fair reason for dismissal, act reasonably in the circumstances in treating that reason as a sufficient reason for dismissal and follow a dismissal procedure. The following reasons will constitute a fair dismissal:

• The employer’s business is in severe financial distress.
• There have already been attempts to resolve issues.
• There is no other option but to dismiss and offer to rehire employees. 

An employee has a right to appeal dismissals. If the matter does end up in the Employment Tribunal, the court will consider the following: if it was a good business idea introducing a change to the employees contract, did they reasonably consult with the employee and their representatives, including making any compromises, did the benefits of the change outweigh the disadvantages for affected employees, the extent the alternatives were considered, if trade unions made any recommendations or objected to the proposed changes, how many employees accepted the changes and how many rejected, and was it reasonable for the employee to refuse the changes. 

Support and Review

Additionally, the employer should consider the support resources they could provide employees and consider reviewing the changes they have made at a fixed point, maybe after 3 or 6 months. If they have multiple changes they would like to implement, they could introduce them on a phased basis. Furthermore, the employer should set out the terms in writing, and they must not introduce new terms that have not been discussed in consultation. 

Once the employer has dismissed the employee, they should offer the new contract terms in writing to the employee and allow them time to either accept or decline the offer. When an employee has made their decision, they should let their employer know, and if they do accept the new contract, then the contract will take effect once the old contract has ended. Additionally, the employee will keep their period of continuous employment, which is the length of service with an employer. It is also worth noting that employees will be able to make a claim for unfair dismissal even if they continue to work with the employer under a new contract. 

Collective Consultation

In some circumstances, employers may have more than one employee to fire and rehire.  When this is the case, they must collectively consult when an employer consults with a recognised trade union or an elected employee representative. The employer must consult to avoid dismissals, reduce the number of dismissals, and limit the consequences of the dismissals within the organisation.  The collective consultation must start for 20 to 99 employees at least 30 days before the first proposed dismissal and for 100 or more employees at least 45 days before the first proposed dismissal. Also, the employer should be aware that the employee could claim a “protective award” if the employer fails to consult collectively. 

To conclude, employers should be aware of the legal and non-legal risks in relation to fire and rehiring, ensuring that they avoid unfair dismissal claims, constructive dismissal claims, and discrimination claims by having complete transparency with employees to avoid liability and continually re-examining their proposals and constantly negotiating with employees. All these steps will reduce the number of conflicts that may arise and will help employers use alternative methods for changing employee contracts.