The first statutory Code of Practice relating to ‘Dismissal and Re-engagement’ comes into force on 18th July 2024. We explore the background to this new Code, when it applies, plus the key provisions and implications for employers.
What is Dismissal and Re-engagement?
Dismissal and re-engagement, also known as ‘fire and rehire’, refers to when an employer dismisses an employee and offers them a new contract on new, often less favourable terms.
Why was the Code introduced?
Following a number of large employers in the private sector engaging in this practice in an unorthodox manner, the government took the decision to introduce a new statutory Code of Practice to encourage employers to act fairly and reasonably in negotiations over changes to terms and conditions.
The Code will apply in situations where employers:
• are contemplating making changes to their employees’ terms and conditions, and;
• envisage that if the employees do not agree to the changes, it may dismiss them and either re-engage them on the new terms or engage new workers on the new terms.
It will apply in all situations, irrespective of the number of employees affected or the employer’s reasons for wanting to change new terms and conditions.
What must an employer consider under the Code?
The Code indicates that an employer deciding whether to 'fire and rehire' must consider the following:
• Employers must not make direct offers to employees where there is a recognised trade union in place (where the offer relates to matters that the union would negotiate under a collective bargaining process).
• If there is a change in the terms of an employee’s written statement of particulars, employees must be notified of that change within one month of the new terms taking effect.
• If any dismissal is to be seen as fair, then the employer must comply to the terms of a fair dismissal.
• If a ‘fire and rehire’ process is engaged, the employer must give as much notice as is reasonably practical.
What are the other Key Provisions employers should consider under the Code?
• Last Resort Measure
‘Fire and rehire’ should only be considered as a last resort. Before reaching this stage, employers should explore all alternative options through meaningful consultations with employees or their representatives (e.g., trade unions).
• Consultation Requirements
The new code requires employers to engage in thorough consultations regardless of the number of employees affected. This consultation process must start as early as possible, providing detailed information to enable meaningful dialogue and reflection on possible alternatives.
• Involvement of ACAS
Employers are advised to contact ACAS before raising the prospect of dismissal and re-engagement.
• Information Sharing
As much information as reasonably possible should be shared about the proposals and allow employees to ask questions and make counter-proposals.
• Applicability
The Code applies to all employers considering changes to employment terms, irrespective of the reasons for the changes. It does not apply if the sole intention is to make employees redundant without the option of re-engagement on new terms.
• Tribunal Considerations
While there are no direct penalties for not following the Code, adherence to it is admissible in court or employment tribunal proceedings. Tribunals can uplift awards to employees by up to 25% if employers are found to have unreasonably failed to comply with the Code.
• Reputational and Commercial Risks
The legislation highlights the significant risks associated with "fire and rehire," including potential reputational damage and adverse effects on employee relations. It emphasises that this approach should be avoided unless absolutely necessary.
What are the implications for Employers?
Employers need to fully engage with the Code to avoid legal and financial repercussions. Wherever possible employers should look to seek voluntary changes and obtain mutual agreement to any changes wherever that is possible. The involvement of ACAS and the requirement for early and detailed consultations aim to create a more balanced and fair process for both employers and employees.
