If an employer wants to change terms and conditions for their employees, they need consent from the staff concerned to do so. If consent is not provided, we see employers considering “firing and re-hiring” which is very much in the spotlight at the moment given the increased operational costs affecting businesses of all sizes. This process comes with a warning as it involves dismissing an employee by providing notice of terminating the existing employment contract, and subsequently re-engaging those employees on new employment terms.
Employees with two or more years' service could claim that they have been unfairly dismissed and may have a good chance of succeeding if the process is not carried out carefully. The financial consequences could be significant, as there could be a claim for loss of earnings alongside the legal costs in defending such claims. There is also the possibility of potential reputational damage.
Furthermore, there are additional considerations for employers seeking to fire and rehire more than 20 employees, as there is a duty to inform and consult with the appropriate Trade Union or elected Representatives. Failure to do so could result in an award of 90 days’ pay per employee.
Following the recent Court of Appeal case USDAW and ors v Tesco Stores Limited [2022] EWCA Civ 978, the previous decision taken by the High Court to grant an injunction against Tesco for their fire and hire process has been overturned.
Tesco wanted to remove an entitlement to ‘retained pay’ (enhanced pay) from employees’ contracts of employment. The High Court had originally restrained Tesco from using the fire and rehire process.
The Court of Appeal case has since ruled that although this enhanced pay was said to be permanent, this did not necessarily prevent Tesco from providing notice to terminate these contracts, and re-hire those employees on new terms. The Court of Appeal made it clear that with any implied term there would need to be absolute certainty that the parties intended it to be permanent and that the employer would not be entitled to dismiss those employees.
The case also clarifies that the appropriate remedy would be a claim for damages, not an injunction which was originally granted by the High Court.
A Statutory Code of Practice has been recommended by the Government to provide guidance on the process of dismissing and re-engaging employees on new terms and conditions.
Once implemented, employers will need to consider this Code to ensure they are following a fair process. Failure to do so could result in a 25% uplift in compensation in the event that an Unfair Dismissal claim is brought against an employer.
Crucially, employers ought not to adopt this controversial approach without full consideration of the risks involved. Businesses should seek advice and advisors will need to keep a close eye on future developments with any potential appeal to the Supreme Court and new guidance.
For more information, please contact Hayley Marles in our Employment team.
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