Fire and rehire has been a hot topic this year and the latest instalment was the publication on November 11th of ACAS guidance on achieving contractual changes without employees being dismissed and rehired.
What is Fire and Rehire?
Fire and rehire is the term used to describe the practice where businesses dismiss their employees and immediately re-offer them their role on new, usually less favourable, terms.
It has been in the headlines in recent months after thousands of employees of some organisations which are household names, were given the ultimatum to sign for the new terms on offer during consultation, or be dismissed and then offered the new terms on a take it or leave it basis.
The government came under pressure to make the practice unlawful, but it did not commit to doing so. It asked ACAS to conduct an evidence gathering exercise to learn more about the use of fire and rehire practices. This was published on June 8th. The government response to it was to go back to ACAS to ask it to produce guidance to help employers explore all other options first before considering fire and rehire to change employee contracts. That guidance covers methods of consultation, the advantages of good consultation and the disadvantages of poor consultation or proceeding without agreement.
But the bottom line is that after the negative publicity and the process of the government engaging with ACAS on the topic, nothing has changed – fire and re-hire is still not unlawful.
Nevertheless, employers should be wary of concluding that this means that it can be implemented without risk. Although many organisations face circumstances where they have contractual commitments that they cannot sustain – common examples being lengthy paid sick leave, various allowances and benefits and rigid working patterns – fire and rehire involves dismissal and in the eyes of Employment Tribunals dismissal should be a step of last resort.
Essential Advice for Employers
Before thinking about fire and rehire, employers should firstly ensure that their case for needing to implement contractual change is strong. It should be of the nature of a financial or operational imperative rather than purely a cost saving. And they should ensure that they have exhausted all possibility of achieving agreement via consultation. Where large organisations have a relatively small number of affected employees who claim unfair dismissal instead of continuing on the new terms, dealing with those claims may be financially more beneficial than leaving the old contracts in place. For companies without significant resources though, the short-term financial impact of losing in Employment Tribunal or having to settle can be significant, so fire and rehire is not the cure-all remedy that it may appear to be at first sight. Strenuous efforts to achieve agreement via consultation should be exhausted first.
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