New Statutory Guidance on 'fire and rehire'

The government has, to date, declined to legislate on the issue of fire and rehire, and has left the fairness of such a process as a matter to be decided by employment tribunals in accordance with case law as and when challenged, although it has been stressed that the practice should only be used as a last resort.

New statutory code of practice

On 29 March 2022, the government announced that it would move to introduce a new statutory code on the practice, which is an about-turn from the previous stance. It is anticipated that the code will provide guidance on the steps employers should take in order to hold fair, transparent and meaningful consultations on any proposed changes to terms of employment.

The new Statutory Code of Practice will also detail how businesses must hold fair consultation on proposed changes to employment terms, which is topical following the P&O Ferries sackings.

The important points to note are that courts and employment tribunals will need to take the code into account when considering cases, including unfair dismissal. Additionally, in cases where an employer unreasonably fails to comply with the code, this can give rise to an uplift of up to 25% in compensation for the employee (in much the same way that the ACAS Code of Practice on Disciplinary and Grievance Procedures is treated).

ACAS published advice for employers regarding “fire and re-hire” during November 2021. See a link to the advice here: https://www.acas.org.uk/changing-an-employment-contract/employer-responsibilities

In light of these developments, it is imperative that employers looking to restructure their workforce or planning to make changes to their terms and conditions are aware of these the new code of practice and take legal advice on their proposals before taking any steps. The new guidance is likely to lead to an increased risk of legal claims and thus the potential for reputational damage if the proposals are not handled and implemented sensitively.