Fire and Rehire – will it still be legal?

ACAS has now published its paper “Dismissal and re-engagement (fire-and-rehire): a fact-finding exercise”. This document had previously been provided to the government to consider in light of recent proposals to legislate on the legality of fire and rehire practices. So what does this mean for fire and rehire, and is it likely to spell the end for fire and rehire in the future limiting options for employers?

What is fire and rehire?

Fire and rehire is the term used to describe the process where employers dismiss their employees (or threaten to during negotiations) and re-offer them their role on new, often less favourable, terms. Currently, provided that fire and rehire is carefully implemented in line with existing contractual rights, a fair reason and a fair procedure there is nothing explicit in English law which makes the process unlawful. That said, if not done well it can result in Employment Tribunal or breach of contract claims, reputational damage or loss of workforce morale and so it can be risky and isn’t without potential repercussion.

Unsurprisingly, fire and rehire is inherently controversial and has recently faced a lot of high-profile media attention (including in relation to British Gas). Supporters argue it is important for business flexibility and a necessary last resort to avoid redundancies, whereas its critics have suggested it creates an imbalance of power in favour of the employer which can be abused and used to erode worker rights. As a result, there has been widespread call for government reform.

What does the ACAS paper mean for fire and rehire?

Primarily, the paper aims to provide the government with information which could inform any future reforms and policy making. It does not therefore make any express recommendations.

However, it does set out some industry opinion on possible reforms. This includes a range of proposed legislative and non-legislative changes such as “tightening” unfair dismissal laws, giving Tribunals more obligation and power to “scrutinise” business decisions, better employer guidance and “publishing ‘name and shame’ data on employers’ use of fire-and-rehire”.

Clearly if implemented these proposals could have a significant impact on both employers and workers, but it is not yet clear how or when the government might choose to act on this report. Fire and rehire was not addressed in the Queen’s Speech in May, and the government has said that its proposed Employment Bill will only be addressed "when parliamentary time allows”.

In the meantime, ACAS say that they will be publishing “further guidance that encourages good workplace practices when negotiating changes to staff contracts", and a Private Members’ bill proposing to prohibit fire and rehire is due to have its second reading in the House of Commons on Wednesday 16 June.  According to some sources, the government has said that it does not intend to ban fire and rehire, and most Private Members’ Bills stand little chance of making it onto the statute book, so it seems as if this Bill will be unlikely to result in a change to the law.

What is clear however is that, as the debate continues, businesses who decide to undertake fire and rehire may well be cast into the public spotlight, making the risks of not executing a watertight fire and rehire exercise even more tangible. The end of the widely used furlough arrangements later on this year may also bring the issue into further focus as businesses plan for a return to work which may involve a wish to change employees’ terms and conditions of employment.

Now more than ever employers should therefore carefully consider the options available to them when seeking amendments to employment terms. Obtaining specialist advice to properly handle any business reorganisation or change to contractual terms is likely to be critical in avoiding unwanted repercussions and our Employment team would be happy to discuss your particular business needs in more detail if required.

For more information on the article above please contact Su Apps and Charles Pallot.