Proposed introduction of a new statutory code of practice on dismissal and re-engagement

The government is proposing to introduce a new statutory code of practice on dismissal and re-engagement in the summer of this year to prevent employers exploiting the practice to enforce change to employment terms. This process is also known as ‘fire and rehire’.

To provide you with a bit of a background, the practice of changing employment terms and conditions by way of dismissing the employee and then re-engaging them has undergone much stipulation over recent years, especially over the covid-19 pandemic period where larger employers were exploiting this practice. A new safeguard (Statutory Code of Practice) is currently undergoing parliamentary debate and intends to impose an obligation on employers to conduct fair and reasonable negotiations over the changes in terms and conditions.

This could apply in all such situations, irrespective of the number of employees affected or the employer’s reasons for wanting to change new terms and conditions.

As a statutory Code of Practice, the Code does not impose any new legally binding obligations on employers, however, it will be considered best practice and it will be considered by the courts or Employment Tribunals.

For some awards these can be increased or decreased by up to 25% where employers and employees have unreasonably failed to comply with the code.

We have listed some of the key provisions below:

1. The ‘fire and rehire’ practice should be used as a last resort. It should also not be used as a ‘scare tactic’ during negotiations of the terms and conditions to help achieve their aims.

2. The consultation and information sharing process should be carefully considered by employers proposing to make changes to their employees’ terms and conditions. The Code recommends that employers should engage with employees or their representatives ‘as early as reasonably possible’, share ‘as much information as reasonably possible’ and engage in consultation ‘for as long as reasonably possible’. It is also noted in the code that when employees and/or representatives that are not prepared to accept proposed changes becomes known, the employer is under an obligation to carefully re-examine their plans in light of workforce feedback.

3. Employers should act responsibly where using this practice and should give as much notice of termination ‘as reasonably practicable’. The Code specifically recommends that employers should consider giving employees more than their contractual notice entitlements. They should also consider and arrange practical support to affected employees by way of career coaching or counselling and if the changes are implemented the code recommends that employers should seek feedback from the workforce once changes have been implemented and commit to reviewing the changes in the future.

4. The Code also requires employers to contact ACAS for advice. This is a novel requirement, and it remains unclear what role ACAS are expected to play in these circumstances, however, the requirement to contact nonetheless exists. This presumably will help employers remain reasonable in their conduct and ensure compliance with the new statutory changes likely to be imposed.

What does this mean for employers?

Despite the fact that the government is seeking to introduce a new code to alter the balance of employers exploiting the ‘fire and rehire’ process, it appears from the key provisions that the legal status will not be substantively altered. Instead, the new requirement to contact ACAS for advice means employers will have to make extended considerations when looking to carry out this process. The revised code as it currently stands does not provide guidance or elaborate on what circumstances will constitute ‘some other substantial reason’ which justify dismissals in the context of negotiations over contractual changes.

So, in short, the process for lawful ‘fire and rehire’ dismissals remain, it just means employers looking to carry out this practice must be aware of the Code and the changes within, especially the requirement to contact ACAS. More information on ACAS’ involvement should be made available following its implementation.

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