In the wake of the recent dismissal of 800 P&O Ferries’ employees, the Government has announced that a new Statutory Code of Practice (the Code) will be published on the controversial use of “fire and rehire” practices when changing employees’ terms and conditions. Even though the P&O employees were not rehired (they were dismissed only), there was no consultation or attempt to comply with employment laws. The Labour Markets Minister Paul Scully explained that: ” that is why we are producing a new code to tighten the screw on unscrupulous employers, who must comply with a new statutory code on tougher employment rules – including fire and rehire.”
This practice of ‘fire and rehire’ (also known as ‘dismissal and re-engagement’) refers to when an employer dismisses an employee and subsequently rehires them on new terms and conditions of employment. Firing and rehiring is permitted under employment law, but can be a risky strategy, and the normal laws of unfair dismissal will apply to the dismissal.
ACAS has already published non-statutory guidance on these practices (in November 2021), advising employers to fully consult their workforces and make every effort to reach agreement on any contractual changes. This non-binding guidance states that fire and rehire is an extreme step that can damage staff morale, trust, productivity and working relationship.
We expect the Code to set out practical guidance for employers to follow when consulting over changes to terms and conditions of employment. It will be a Statutory Code which means that courts and Employment Tribunals will be required to take it into account when considering claims, including unfair dismissal. They will have the power to apply an uplift of up to 25% of an employee’s compensation award if there has been an unreasonable failure to follow the Code by the employer.
Further details of the Statutory Code of Practice are now awaited.
This is only intended to be a summary and not specific legal advice. If you would like further information or advice, please do contact a member of our team.