05 May 2021 #Employment
Following a Commons debate on 27 April 2021, the Government are considering their response to an ACAS report on the use of a ‘fire and rehire’ approach by employers.
What is fire and rehire?
The controversial practice involves terminating an employee’s existing employment contract and offering to re-hire them on new terms, which are often detrimental to the employee.
This option is usually exercised as a last resort, where an employer cannot make the proposed changes using existing powers in the employee’s contract and the employee has not given their agreement to the changes.
Fire and rehire has been increasingly deployed by businesses of all sizes as they grapple with the financial impact of the Covid-19 pandemic, but there has been significant backlash to this approach from employees and trade unions alike.
Recent examples include British Gas, who are in an ongoing dispute with the GMB Union following the dismissals of gas engineers who did not accept the new terms and conditions, and Heathrow Airport, whose workers took multiple days of strike action before a deal with negotiated with Unite the Union in early April.
What are the risks?
The use of fire and rehire as a way of amending terms and conditions in employment contracts is not without risk; in addition to the potential damage to employee and industrial relations, there is the risk of claims in the employment tribunal. Employees with more than two years’ service may be able to bring a claim for unfair dismissal, while dismissal without the correct amount of notice could result in wrongful dismissal claims.
Further, if the number of employees subject to the fire and rehire approach is 20 or more, employers will be required to comply with their collective consultation obligations as they would in mass redundancy situations.
There have been growing calls from groups such as the TUC to outlaw fire and rehire, which has led to MPs debating the practice in Parliament. The Government have been urged to address the practice as part of the upcoming Queen’s Speech set for 11 May 2021.
It is not the first time that Parliament have reviewed fire and rehire; the Employment (Dismissal and Re-employment) Bill was introduced in June 2020, which aimed to prohibit the practice, but this was withdrawn early 2021.
How can an employer change terms?
If an employer is considering changing terms to an employment contract such as pay, hours or benefits they should look at the existing contract and then consult with the related employees clearly explaining any proposed changes and the reason.
Employees should be given an option to express their views and employers should explain consequences of refusal to the changes such as redundancies. Ideally a beneficial agreement should be reached. If an agreement cannot be made than the employer can implement new terms, however this is risky as employees can resign and claim unfair constructive dismissal or seek industrial action.
It is unclear what steps the Government will take, if any, to address the use of fire and rehire. Business Minister Paul Scully acknowledged the Government must have regard to both the protection of employees, and the commercial viability of businesses before it takes a decision. With the controversy around the practice likely to continue, we anticipate there is more to come on this matter.
Changes to terms and conditions in an employment contract require specialist legal advice; contact our employment lawyers.