A new statutory Code of Practice surrounding dismissal and re-engagement, often referred to as “fire and rehire,” will come into power in July following recent legislative progress.
A statutory instrument issued on 31 May and presented to Parliament on 28 May will become effective in England, Scotland, and Wales on 18 July 2024, unless repealed by a new Government following the general election on 4 July.
In the general election polls, Labour who are currently leading by 21 points ahead of the conservatives have criticised the code as “inadequate” and pledged to “strengthen” it.
Under the new code, Employment Tribunals will have the authority to increase an employee’s compensation by up to 25% if an employer “unreasonably fails” to adhere to the code.
During February, when the draft code was presented, Business Minister, Kevin Hollinrake, stated:
“Our new code will crack down on employers mistreating employees and sets out how they should behave when changing an employee’s contract.
This announcement shows we are taking action to tackle fire and rehire practices by balancing protections for workers with business flexibility”.
The code aims to ensure that employers conduct appropriate consultations and treat employees fairly when attempting to alter terms and conditions. Employers must explore alternatives to dismissal and re-engagement and engage in meaningful discussions with employees or trade unions to reach a mutually agreed outcome.
What does the draft Code outline?
Inevitably, employers will need to take steps to amend employees’ terms and conditions from time-to-time for a variety of reasons including economic and strategic reasons, to reflect changes in working arrangements and practices, and/or to harmonise terms across the workforce.
The Code sets out the employer’s responsibilities when seeking to change terms and conditions of employment. At the heart of the Code, is the importance of meaningful consultation between employees (or representatives/trade unions as the case may be). Regardless of whether an employee’s contract is in writing or terms have been agreed upon verbally, that constitutes a legally binding agreement and should not be varied unilaterally.
The Code provides guidance and recommendations as to how employers should deal with any disagreements that do arise, or steps to take if an agreement cannot be reached. In particular, it advises:
- If numerous changes are proposed, where possible, they should be implemented over a period of time rather than all at once (depending on the proposals in question);
- Employers should inform employees that proposed changes will be kept under review so that original terms might be reintroduced or further amended if appropriate;
- Employers should re-examine their business strategy in the event an agreement cannot be reached.
What does this mean for employers?
Changing terms and conditions of employment always has the potential to lead to disagreement between employers and employees. The introduction of the Code will hopefully minimise those disagreements, by encouraging employers to take a more consultative approach.
For employers, it is important to not only invite feedback from employees on proposed changes but to listen to any feedback that is given and give due consideration to that, as well as properly consider the necessity of the proposed changes at the outset.
As has been shown to be the case previously, there can be damaging consequences in adopting dismissal and re-engagement and/or seeking to unilaterally vary terms and conditions of employment, including:
- Risking or damaging reputation;
- Damaging employee relations and trust and confidence between staff, resulting in resignations and possible constructive dismissal claims;
- Strike action; and/or
- Employers being on the receiving end of legal action and have to spend management time and resources in defending that, as well as incurring associated legal costs.
Susan Clews, Acas Chief Executive, said:
“Fire and rehire is an extreme step that can seriously damage working relations and has significant legal risks for organisations. Employers should focus on maintaining good employment relations to reach agreement with staff if they are thinking about making changes to their contracts.”
How Nelsons can help
If you would like any advice concerning the subjects discussed in this article, please contact our expert Employment Law team in Derby, Leicester, or Nottingham on 0800 024 1976 or via our online form.
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