Before the General Election, the Conservative government introduced a new statutory Code aimed at regulating the use of “fire and rehire” practices.
The practice of “fire and rehire” is where an employer dismisses workers and immediately offers them re-engagement on alternative terms and conditions, or sometimes the employer might hire new (sometimes cheaper) workers who are prepared to agree to the terms and conditions.
It is a robust way of changing terms and conditions where workers are likely to resist, or where the change has to be made quickly – usually in circumstances of financial distress.
Back in 2022, P&O Ferries dismissed 800 people without prior consultation. The publicity around this event was particularly adverse and prompted the former government to launch a consultation. The output was the Code.
After some back and forth, the finalised Code eventually came into force on 18 July 2024.
The Code is designed to encourage employers to behave fairly and reasonably when seeking to change terms and conditions. It includes a step-by-step process that employers should follow.
In summary, the Code requires meaningful consultation to explore alternative options, and it prohibits undue or unduly premature threats of dismissal to obtain agreement to proposed contractual changes.
Ultimately, the Code is aimed at ensuring the practice of “fire and rehire” is always a last resort.
The Code has been widely criticised as lacking any real teeth because a breach of it will not result in a freestanding legal claim.
However, where there is an existing claim such as unfair dismissal, the Employment Tribunal will be able to award a compensatory uplift of up to 25% in respect of any unreasonable failure of the employer to follow the Code.
This financial consequence is consistent with any breach by an employer of the ACAS Code on grievance and discipline. However, it doesn’t extend as far as inflating the protective award for any failure to collectively inform and consult on any proposed contractual changes.
The new Labour government was critical of the Code prior to the General Election, but it did not block its implementation on the basis that it offered at least some improved protection for workers.
In an address on 18 July 2024, Labour reiterated its pledge to replace the Code with a strengthened version within 100 days of office. The detail is yet to be released but watch this space.
For now, anyone considering making changes to terms and conditions should exercise caution. Employers are encouraged to take advice before proceeding to minimise the risk of Employment Tribunal claims and increased financial exposure as a result of the Code or any successor version(s) of it.
If you have any questions or need advice get in contact with Victoria and the Employment team.