fire and rehire – set to continue

The Government indicated in June that it has no intention of introducing legislation to ban ‘fire and rehire’ practices. And it has now formally blocked the Employment and Trade Union Rights (Dismissal and Re-engagement) Bill which was set to introduce legislation to prevent employers from enforcing less favourable terms of employment.

As explained by my colleague Mark in his blog a few months ago, fire and rehire (or dismissal and re-engagement) describes a practice that allows employers to legally change the terms of an employee’s contract. An employer will usually discuss the changes with the employee (and will have to do so if the changes involve 20 or more employees) but if the employees do not agree to the new terms, it is open to the employer to dismiss them (with notice as per the old contract) and re-engage on the new contract.

This inevitably leaves employees with little option but to agree. If they have two years’ service, and they can show that the employer did not have a legitimate business reason and failed to follow a reasonable process, they may have a claim for unfair dismissal. But this recourse is often long and costly.

In preparing this blog, I read the transcript of the Second Reading of the Bill. The examples given of the employees being subject to these practices often provide vital services and for what would be described as a modest/low wage by companies who are profitable: recent examples are the Tesco, Sainsbury’s and British Gas fire and rehire disputes. A small change to a large and profitable company will be a big change to an employee on a modest/low wage. Sometimes there may be a business need for introducing new terms for example to prevent redundancies but in my opinion, it should really only be done in limited circumstances.

In June 2021 the Government requested that Acas prepare detailed guidance on how and when dismissal and re-engagement can be applied. Now we wait. But until then employers can use this practice as a way to change contracts.

This blog was written by Jo Sinclair, Solicitor at didlaw.