New code of practice on fire and rehire

In March 2022, in response to public concern over the use of “fire and rehire” practices to implement changes to employees’ terms and conditions, the Government announced that it would introduce a new Statutory Code of Practice on Dismissal and Re-engagement (the Code). 

Following consultation with employees, unions and businesses, a draft code was prepared setting out how employers should act when seeking to make changes to employment terms and conditions if an employer envisaged dismissal and re-engagement. 

Since then the Government has recently published an updated Code of Practice on Dismissal and Re-engagement). If it is approved by Parliament, it will most likely come into effect later this year.  

The Code requires employers to consult with affected employees and explore alternative options to dismissal, without raising the prospect of dismissal unreasonably early or using the threat of dismissal as a negotiating tactic to put undue pressure on employees if the employer is not envisaging dismissal. It recommends that dismissal and re-engagement should be a last resort.  

Since the first iteration of the draft Code, the Code has been modified to reflect the following changes:

• The original draft Code required employers to contact Acas if they were unable to reach agreement with employees about fire and re-hire. This requirement has now been strengthened. Employers must contact Acas at an early stage, before they raise the possibility of fire and rehire with the workforce.

• The Code has been amended to state that it is good practice for employers to give information to employees in writing.

• The Code does not apply in redundancy situations but it will apply where both redundancy and fire and rehire are being considered as options.

• While there is no minimum set time requirement, there is a requirement to consult ‘for as long as reasonably possible’.

• Employers will need to explore alternatives to fire and rehire and fire.

There is no stand-alone claim an employee can bring if their employer fails to follow the Code. However, a failure to follow the Code may be taken into account by Employment Tribunals in relevant cases including in claims for unfair dismissal.

Tribunals will have the ability to uplift compensation by up to 25% if an employer unreasonably fails to follow this Code. 

It remains to be seen whether the new Code will have any impact on employer conduct and whether it might be one step closer to eliminating the widespread use of a practice that leaves a lot to be desired.

This blog was written by Anita Vadgama, Partner at didlaw.