Fire and Rehire Laws – a timely reminder

A recent Supreme Court decision against Tesco serves as an important reminder of the risks of employers using ‘fire and rehire’ to impose changes to terms and conditions and how this should only be used as a last resort.

In July 2024, a new Code of Practice on dismissal and re-engagement (also known as fire and re-hire) came into effect outlining best practice for employers. The practice of dismissing and re-engaging employees is used as a means of changing terms and conditions of employment and can cause conflict between employers, employees and trade unions.

 

What does the new code of practice on fire and rehire include?

The Statutory Code sets out the provisions that employers should consider and follow before adopting fire and re hire practices to ensure that dismissal and re-engagement is only used as a final option.

The provisions include:

• Taking all reasonable steps and considering any alternatives to dismissal, with a view to reaching an agreed outcome.
• Engaging in meaningful consultation with employees for as long as reasonably possible.
• Contacting ACAS for advice before raising the prospect of dismissal and re-engagement.

 

What if an employer breaches the code?

Any breach of the Statutory Code will be taken into account by the Employment Tribunal and compensation may be uplifted by up to 25% where relevant claims are brought. This is similar to the way in which the Employment Tribunal may decide to uplift any award by up to 25% where employers are found to be in breach of the ACAS Code of Practice on disciplinary and grievance.

Whilst the Code aims to enhance employee protection, its impact on business practices remains to be seen. The recent ruling against Tesco where, according to the BBC, “they proposed firing staff at some distribution centres and rehiring them on lower pay" should be seen as a significant warning to employers who are considering making changes to contractual terms. The Supreme Court said “Tesco's right to stop employees' contracts could not be used to take away their enhanced pay”.

 

What should Employers do when seeking to make changes to employment contracts?

A good starting point for employers wishing to engage in a contractual variation process is to check the terms of the contracts of employment and the circumstances in which they were agreed.

Employers should try to come to an agreement with employees in the first instance, inviting feedback from employees about the changes and considering what could be done to mitigate any negative impact on the affected employees.  

If changes are agreed, it is good practice for the employer to communicate the changes to affected employees in writing, setting out clearly when the changes will come into effect, giving as much notice as reasonably possible.

If there are any proposed changes to an employee’s written statement of employment particulars, employers must give the employee a written statement of change within one month of the new terms taking effect.

 

We would recommend that employers review employment contracts and seek legal advice when looking to amend contractual terms.

Speak to our Employment Law team at employment@bannerjones.co.uk or call us on 01246 605 132.

You may also be interested in reading about some recent changes to Employment Laws in England and Wales - Navigating the recent changes in UK Employment Laws - April 2024 | Banner Jones Solicitors in Sheffield, Chesterfield, Dronfield & Mansfield

 

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