UK: Fire & re-hire: Updated Code

Authors: Heidi Watson, Ruth Bonino, Corinna Harris and Sophie Jackson

On 19 February 2024, the government published a revised draft statutory Code of Practice on Dismissal and Re-engagement and Explanatory Memorandum, which if approved by Parliament is expected to come into force later this year. The draft Code was the subject of a government consultation last year which arose following the actions of P&O Ferries dismissing 800 workers without consultation in March 2022. The Code sets out the detailed steps employers should take when seeking to make changes to an employee’s contractual terms where “dismissal and re-engagement” is proposed. “Dismissal and re-engagement” means dismissing employees, before either offering to re-engage them, or offering to engage other employees, in substantively the same roles, in order to effect the changes. Key aspects include:

• The Code applies where an employer proposes changes to contractual terms, and “dismissal and re-engagement” is an option if the employee or their representative does not agree to some or all of the proposed changes, regardless of how many employees are affected or the business reasons for the changes.
• Dismissal and re-engagement should be the last resort when changing contractual terms.
• Information should be provided as early as reasonably possible.
• Employers should take all reasonable steps to explore alternatives to dismissal and engage in meaningful consultation with a view to reaching an agreed outcome.
• Parties should engage openly and in good faith to enable meaningful consultation.
• Once it is clear that agreement cannot be reached, but the employer still needs to implement the changes, the employer should re-examine its proposals, taking into account any feedback received.
• Threat of dismissal shouldn’t be used as a negotiating tactic to put undue pressure on employees.
• Employers should contact ACAS (the Advisory, Conciliation and Arbitration Service) for advice before raising the prospect of dismissal and re-engagement with employees or their representatives.
• Employment tribunals must take the Code into account where relevant in any tribunal proceedings and may adjust compensation by up to 25% to reflect unreasonable non-compliance.

Key Action Points for Human Resources and In-House Counsel

When seeking to change terms and conditions of employment, employers should remember that this Code will be engaged as soon as the employer raises the prospect of dismissal and re-engagement (on revised terms), as a consequence of not accepting any of the employer’s proposed changes. The Code does not ban the practice of dismissal and re-engagement but rather encourages employers to enter into a dialogue with employees or their representatives to explore options before unilaterally seeking to dismiss and re-hire on new terms.

Employers should always consider the numbers of employees concerned to determine whether the collective redundancy obligations also apply when seeking to change terms and conditions.

Government cracks down on controversial ‘fire and rehire’ practices – GOV.UK (www.gov.uk)