Expert urges employers to look at government’s Draft Code
THE practice of “firing and rehiring” has been in the press frequently over the last year.
“Firing and rehiring”, or dismissal and re-engagement, refers to when an employer dismisses an employee and offers them a new contract on new, often less favourable, terms. It is a controversial practice but employers generally only use it as a last resort where they are unable to agree changes with the workforce.
Earlier this year, the government published a draft Statutory Code of Practice on Dismissal and Re-engagement (the Draft Code). This sets out proposals for what would become specific employer responsibilities when seeking to change employment terms and conditions by taking this course of action.
The Draft Code does not seek to prohibit dismissal and re-engagement. Instead, it attempts to find a balance between labour market flexibility and worker protections. The Draft Code recognises that, in some situations, dismissal and re-engagement plays a valid role in allowing businesses to meet changing requirements.
The Draft Code seeks to protect employees by ensuring employers take all reasonable steps to explore alternatives to dismissal before considering firing and rehiring. It expects employers to engage in open and meaningful consultation with trade unions, employee representatives and/or individual employees.
The Draft Code is explicit that employers should not threaten dismissal as a tactical approach simply to pressure employees to agree to new terms.
The Draft Code sets out a step-by-step process for employers to follow when consulting about changes and exploring alternatives to dismissal. It recognises that different steps may apply to different scenarios and that many employers likely already proceed in this way as a matter of best practice. The Draft Code process is:
• Communicate the desire to change terms and conditions to employees.
• If employees do not accept the new terms without negotiation, the employer should reassess the business strategy behind changing terms.
• Engage in meaningful and good-faith consultation by informing employees of the employer’s objectives and of the nature of proposals, as well as the consequences of unilateral imposition or dismissal if negotiations fail.
• Ensure that enough time is given to this consultation period.
• Dismiss and re-engage only as a last resort and review changes and provide practical support to employees.
The Draft Code is based on ACAS advice and, if implemented, will become a statutory code of practice.
It does not impose any legal obligations on employers, but employment tribunals would take it into account where claims follow firing and rehiring. Much of the Draft Code represents what is already regarded as good practice.
Perhaps the most notable change the Draft Code would implement is giving a court or tribunal the power to increase (or decrease) an award by up to 25% if it finds that an employer (or potentially an employee) unreasonably failed to follow the Draft Code (for example, by failing to engage in meaningful consultation).
Where an employer is considering 20 or more dismissals at an establishment, it must comply with the legal obligations relating to collective redundancy consultation as well as the Draft Code. If a trade union is recognised for the purposes of collective bargaining, the employer should comply with its collective bargaining obligations in the usual way.
The Draft Code is not yet in force, pending conclusion of a consultation on its terms. Despite that, employers should approach any decision on firing and rehiring carefully and be mindful of the provisions of the Draft Code. There is no doubt that fire and rehire tactics can have a significant negative reputational impact and cause long-term employee relations.
In the meantime, employers should take the opportunity to review the Draft Code and provide their input before the consultation closes on 18 April 2023.
