New 'fire and rehire' rules now in force

The new statutory Code of Practice on Dismissal and Re-engagement is now in force. It sets out the expectations on employer behaviour when they are looking at changing employee terms and conditions. Here is a round-up of the key points that you need to know.

What is dismissal and re-engagement?

Dismissal and re-engagement, sometimes known as ‘fire and rehire’, is the practice of forcibly changing terms and conditions by dismissing an employee and re-engaging them on the new terms. Employers must have a valid business reason to justify the change they are proposing and follow a fair procedure. Employers should not rush to dismiss and re-engage – it should be a last resort.

What is the statutory Code of Practice on Dismissal and Re-engagement?

The statutory Code of Practice on Dismissal and Re-engagement, in force from 18 July 2024, sets out principles it expects employers to follow when dismissing and re-engaging employees. It applies where an employer is considering making changes and envisages that, if the employee does not agree to some or all of the changes, it might dismiss and re-engage them. It also applies regardless of the number of employees affected by the proposed change. The Code aims to ensure that employees are not simply threatened with dismissal as a way to obtain agreement to the changes.

Consultation:

The Code encourages a greater level of consultation and seeks to ensure that employees are treated fairly during the process. Meaningful discussions should, therefore, take place and the parties should engage with each other openly and in good faith. Employers should be clear about its objectives and the nature of the proposals.

The prospect of dismissal should not be raised unreasonably early, and the Code requires employers to contact ACAS (the Advisory, Conciliation and Arbitration Service) before doing so. Employers should make a note of this call so that they can show that they have made contact.

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Share information:

The Code requires employers to share are much information as possible so that the employees and their representatives, where applicable, are able to understand the reasons for the proposed changes, can ask questions, and make counterproposals. There is, however, no requirement on an employer to share information that they reasonably believe is commercially sensitive or confidential.

Re-examine plans:

Before reaching a decision, employers need to re-examine their proposals. They should consider the objectives that they are trying to achieve, whether there are any negative consequences and any risk of discrimination. They should also consider whether there are any reasonable alternative ways of achieving the objectives.

Outcome:

If an agreement is reached, at any stage of the process, then this should be confirmed in writing within one month.

If an agreement cannot be reached and an employer decides to dismiss and re-engage on the new terms, once the Code has been followed, the employer should give as much notice as possible and provide practical support if it can.The new terms should also be set out in writing within one month.

What happens if the Code is not followed?

A failure to follow the Code does not in itself mean that an employer will be liable to proceedings. However, if an employee does bring a claim of unfair dismissal in an employment tribunal, then the tribunal will consider whether or not the employer acted in line with the Code.

The tribunal can increase any award it makes by up to 25% if the employer has unreasonably failed to comply with the Code.

Whilst the process of dismiss and re-engagement is not of itself an unfair practice – it can be a valid route for employers to take to change terms and conditions – there needs to be a valid business reason and the Code needs to be followed. Given the complexities involved, if you are considering a change to terms and conditions contact the Advisory Service who will be able to guide you through the process, step-by-step.