Legal update – Fire and Rehire

BEIS have issued a draft Statutory Code of Practice on Dismissal and Re-Engagement  to cover situations where this is used as a means of achieving changes to terms and conditions. The draft Code takes account of advice received from ACAS and has been published for a public consultation which will end in April 2023.

Once the Code is enacted following the consultation period and any changes made to it as a result, it will have the effect that if a company does not follow the Code, then an Employment Tribunal can uplift any award by up to 25% (although the Code does not create a stand-alone legal right to bring a claim). An Employment Tribunal can also decrease an award by up to 25% if an employee does not follow the provisions of the code.

The Code will apply where both:-

  •  An employer considers that it needs to make changes to employees contracts of employment; and
  • The employer envisages that if the employee refuses to accept the changes, it may dismiss them and offer them re-engagement on the new terms or alternatively engage new employees and /or workers to carry out the role on the new terms.

The Code will not apply to genuine redundancy situations as defined in the Employment Rights Act 1996.

The provisions of the Code may overlap with other statutory obligations such as collective consultation requirements or collective bargaining with a recognised Trade Union. All other legal obligations must be complied with independently of the Code.

The draft Code sets out a step–by-step process which an employer should follow to find a solution. It is made clear that dismissal can only be used as the last resort.

Some of the features of the draft Code are summarised :-

1. The employer must communicate the desire to change terms and conditions to employees, and consult and negotiate with them for as long as possible in good faith to try to reach a resolution, even where the employer believes that employees are unlikely to accept the changes. 

2. If employees reject the changes the employer should reconsider its business strategy and plans in view of the potentially serious consequences for employees. There is a list of matters which should be looked at eg reputational risk and damage to industrial relations, the potential for industrial action, the risk of losing valued employees and whether there may be other ways to achieve the required objectives. 

3. Guidance is provided on what is meant by “meaningful consultation” and the court states that the threat of dismissal should never be used purely as a negotiating tactic. 

4. Guidance is also given within the draft Code on the timing of consultation and indicates that a longer period for consultation is more likely to achieve agreement. 

5. Dismissal and re-engagement is expressly stated to be a last resort although it is not banned. 

6. It suggests considering a phased introduction of changes, and that the employer may be able to agree to review changes at a fixed point in future to consider whether the changes are still required. 

7. The employer should consider any practical support it can offer employees, eg relocation allowances, counselling or career coaching.

If any employers are currently embarking on the process of changing terms and conditions, then it would be wise to attempt to comply with the provisions of this Code as it could come into force before the consultation process can be concluded.

If you have any questions please speak with your usual contact within the Legal & HR Team at Scottish Engineering. We will keep you advised as to the progress of the draft statutory code.