“Fire and re-hire” – New Statutory Code of Practice
A new statutory code of practice on dismissal and re-engagement (I.e. “fire and rehire practices”) is due to come into force on 18 July 2024 in England, Scotland and Wales.
The Code of Practice (Dismissal and Re-engagement) Order 2024 was approved by Parliament on 28 May 2024 following a consultation carried out last year. The Code clarifies that it shall not apply to scenarios where the prospect of dismissal and re-engagement has been raised by the employer with the employee and/or their representatives before 18 July 2024.
The practice of employers using ‘fire and re-hire’ tactics has long been criticised, particularly by Trade Unions. It gained particular notoriety in 2022 when P&O Ferries hit the headlines for dismissing around 800 employees without consultation, before replacing the roles with agency staff. This practice involves employers who wish to make changes to employees’ contractual terms seeking to dismiss those employees who do not agree to such changes during consultation and offering them new employment in the same roles on the (usually less favourable) new terms.
Under the new Code, it is made clear that whilst dismissal and re-engagement is not unlawful, fire and re-hire tactics should only be used as a last resort. The Code confirms that any consultation with employees and/or their representatives regarding new terms should be carried out early and be meaningful in nature, with a view to reaching an agreed outcome. The threat of fire and re-hire should not be used as a negotiation tool – i.e. where it is not actually envisaged by the employer.
The new Code aims to provide practical guidance to employers and employees where changes to contractual terms are proposed and it is envisaged that if agreement is not obtained to such changes, dismissal and re-engagement may be necessary. The Code shall apply regardless of the reason for the employer seeking to change the terms or the number of employees potentially affected.
Failure to follow the Code does not, on its own, give rise to a claim by an employee, however any compensation awarded for some claims (e.g. unfair dismissal) can be increased by up to 25% if the employer has failed to unreasonably comply with the Code. It is also notable that Labour indicated they would seek to ban fire and re-hire practices if successful in the 2024 general election.
If employers are considering making changes to employees’ terms and conditions, or the use of fire and re-hire tactics, it is important to seek legal advice at an early stage to ensure they are complying with all of their legal obligations, including under this new Code and, if relevant, in respect of collective consultation.
