Fire and rehire – how employers and employees are affected

The statutory Code of Practice on Dismissal and Re-engagement (more commonly known as the Code of Practice on ‘fire and re-hire’) came into force this July 2024. So what does it mean for employers and employees?

Fire and rehire code of practice

It will still be lawful to fire and re-hire, provided a fair procedure is carried out, in line with the new statutory Code of Practice on Dismissal and Re-engagement (“the new Code of Practice”), however more consultation and conciliatory measures are recommended between employers and their employees.

The new Code of Practice must be taken into account by employment tribunals in relevant cases, including unfair dismissal and it gives employment tribunals the ability to uplift compensation by up to 25% should an employer unreasonably fail to follow it. The new Code of Practice will operate in a similar way to the ACAS Code on Grievance and Disciplinary Procedures. It is important to note that the uplift of up to 25% does not apply to protective awards for failure to inform and consult in collective redundancy situations.

What is fire and rehire?

Essentially, “fire and re-hire” is when an employer wants to change the terms and conditions of employees’ contracts of employment and employees have not previously agreed to the same. In the first instance, once employers become aware that the proposed changes are not agreed, they should attempt to seek to re-examine them and consider feedback from employees and/or any representatives. If no agreement is reached, an employer may resort to the use of “fire and rehire” in order to implement the changes it requires. In this regard, employers should explore alternatives to the use of “fire and rehire”.

Further, employers should not threaten dismissal if there is no real prospect of dismissal. They should also not use threats of dismissal in order to coerce employees into signing new terms and conditions more favourable to the employer. The new Code of Practice also states that the employer should ensure that the only terms which are changed are those which have been subject to the information-sharing and consultation process, and should not use this as an opportunity to make any further changes.

The “fire and rehire” tactic was frequently used during the Covid pandemic as many businesses teetered on the brink of collapse.  It is often viewed as a last resort, and should indeed only be used in such circumstances, for employers, but also as a way of businesses being able to restructure workforces by making significant changes to the terms and conditions of employment, such as pay reductions, making changes to holiday allowances and altering shift patterns.

There is a requirement to consult ‘for as long as reasonably possible’, however, unlike collective redundancy consultation, there is no minimum time period. Employers should contact ACAS at an early stage, before they raise ‘fire and rehire’ with the workforce.

How does fire and rehire work?

The employer gives staff notice that their existing employment contract is to be terminated and then offers them re-employment on new terms.   However new employment will be continuous as re-hire does not reset the employment start date and so there is no break in continuous service.

Is fire and rehire legal?

In all their pre-election briefing the Labour party stated that “fire and rehire” was part of a large package of employment measures.  The new Code of Practice focuses on meaningful consultation with employees, the threat of dismissal should not be raised if staff do not agree to any changes. The aim is to deter “fire and rehire” practices.

“This fire and rehire process is not illegal under employment law, it is however only considered acceptable as a last resort,” says employment law solicitor Lucy Croft.

“An employer will have to have followed all the correct procedures, given appropriate notice periods and followed a long process before they can just fire someone and of course formal consultation with workers and unions should take place, otherwise they will face stark Tribunal decisions going against them.”

Fire and rehire employee rights

If you are fired by an employer but then asked to return on different terms what can be done if it’s a choice between accepting a less than favourable new contract, or losing your job?

“If these processes are not followed that is when we can help staff who are facing a fire and rehire situation,”

“The best thing we would say is to chat with your union representatives and / or a good employment law solicitor who can advise on the law and how it works in your favour,” says Lucy.

Employment tribunals will take the new Code of Practice into account and have the power to apply for more compensation if the employer has failed to act within the same.

The new Code of Practice does not apply in redundancy situations, however, it will apply where both redundancy and fire and rehire are being considered.

Can your employer change your working hours?

There is an option that would allow your employer to change your hours without your agreement if your employer can establish a sound business reason for the proposed change in working hours, but they would need to fully consult with you about this change.

If you still cannot reach an agreement, then your employer could provide the correct contractual notice of termination of your current contract with an offer of new employment on the changed hours. As long as your employer could establish a sound business reason for the change, that they had conscientiously and meaningfully consulted with you and had acted reasonably, then any termination of the existing contract could be held to be fair.

“The world of employment law can be tricky but understanding your rights as an employee is essential,” adds Lucy.

Equally, employers need to consult with an employment law specialist in order to fully understand the use of “fire and rehire” and avoid employees bringing claims against them, such as unfair dismissal, in the employment tribunal.

How can we help?

For legal advice on matters regarding fire and rehire contact our employment law solicitors on 0161 785 3500 or email enquiries@pearsonlegal.co.uk 

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Please note that the information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Pearson Solicitors and Financial Advisers Ltd or any of its members or employees. Professional legal advice should be obtained before taking, or refraining from taking, any action as a result of this article.