Policy Explainer A new statutory code on fire and rehire

Fire and rehire refers to the practice of employers dismissing employees and offering them new contracts on less favourable terms. Although P&O Ferries did not use a straightforward fire and rehire strategy, because it used agency staff to replace sacked staff, the tactics used were similar enough to draw enough political pressure for the government to announce a ‘crackdown’ on fire and rehire.

To this end, the government consulted on the introduction of a statutory Code of Practice on fire and rehire in 2023 and published the draft Code in February 2024. Subject to Parliamentary approval, the Code is likely to come into effect in late summer 2024.

What is in the Code?

The purpose of the Code is to clearly set out how employers should behave when seeking to change employees’ terms and conditions, aiming to ensure employees are properly consulted and treated fairly.

Some of the key tenets of the Code include:

• The importance of initiating early and meaningful consultations with employees or their representing trade unions.
• The employer should contact Acas for advice before raising the prospect of fire and rehire.
• Even where the employer considers that the employees and/or their representatives are unlikely to agree to the proposed changes, it should consult for as long as reasonably possible in good faith.
• Employers should provide information as early as reasonably possible and should share as much information regarding the proposals as reasonably possible.
• Employers should not use threats of dismissal as a negotiating tactic to pressure employees into accepting new terms, nor should they raise the prospect of dismissal unreasonably early or threaten it where it is not envisaged.
• If it becomes clear to the employer that employees and/or their representatives do not agree to some or all of the contractual changes which it has proposed, but the employer considers that it still needs to implement the changes, the employer should re-examine its proposals.
• An employer opting for fire and rehire should give as much notice as reasonably practicable of the dismissal and should re-engage the employee as soon as reasonably practicable.

What happens if an employer does not adhere to the Code?

A failure to comply with the Code does not, in itself, make an employer liable to proceedings.

However, courts and employment tribunals will take the Code into account where relevant, including in unfair dismissal claims where the employer should have followed the code.

If an employer is found to have unreasonably failed to comply with the Code, employment tribunals will have the power to apply an uplift of up to 25% of an employee’s award.

At the same time, an employment tribunal can reduce an award by up to 25% if the employee is found to have unreasonably failed to comply with the Code.

What is the future of fire and rehire?

As part of its proposed package of employment reforms, the Labour Party has pledged to ‘end fire and rehire’. If the party wins the next general election, which is expected to take place in late 2024, legislation to ban the practice – or at least to significantly curtail its use – is therefore likely.