PRESS RELEASE : Government cracks down on controversial ‘fire and rehire’ practices [February 2024]

The press release issued by the Department for Business and Trade on 19 February 2024.

The Government has announced action to tackle the use of controversial ‘fire and rehire’ practices.

• Government acts against controversial dismissal tactics through a new statutory Code of Practice.
• Employment tribunals will have the power to apply an uplift of up to 25 percent of an employee’s compensation if an employer unreasonably fails to comply with the code.
• Code protects workers’ rights whilst respecting business flexibility.

Action against unscrupulous employers to tackle the use of controversial ‘fire and rehire’ practices will be rolled out by the Government today [19 February].

Dismissal and re-engagement, also known as ‘fire and rehire’, refers to when an employer fires an employee and offers them a new contract on new, often less favourable terms.

The Government has been clear that it firmly opposes this practice being used as a negotiating tactic. Today, a new statutory Code of Practice has been published making clear how employers must behave in this area.

This new Code of Practice shows the Government is going a step further to protect workers across the country. This will help to preserve security and opportunity for those in work, as part of our plan to grow the economy.

Business Minister Kevin Hollinrake said:

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 re-hire practices by balancing protections for workers with business flexibility”.

In future the courts, and employment tribunals, will take the Code into account when considering relevant cases. This will include on unfair dismissal claims where the employer should have followed the Code.

Employment tribunals will have the power to apply an uplift of up to 25 percent of an employee’s compensation if an employer unreasonably fails to comply with the Code.

The new Code clarifies how employers should behave when seeking to change employees’ terms and conditions, aiming to ensure employees are properly consulted and treated fairly.

Employers will now also need to explore alternatives to dismissal and re-engagement and have meaningful discussions with employees or trade unions to reach an agreed outcome.

The Code makes it clear to employers that they must not use threats of dismissal to pressurise employees into accepting new terms. They should also not raise the prospect of dismissal unreasonably early or threaten dismissal where it is not envisaged.

Acas Chief Executive Susan Clews 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.

Acas offers impartial advice on employment rights and obligations, and has expertise in helping parties to maintain good industrial relations and resolving disputes where they arise.

The Government’s new draft Code is clear that employers should contact Acas for advice before they raise the prospect of fire and rehire with employees.

Principal Policy Advisor at Institute of Directors, Alexandra Hall-Chen said:

The publication of this Code of Practice provides employers with welcome clarity and practical guidance.

The Code rightly places good industrial relations at its core and represents an effective means of balancing worker protections with labour market flexibility.

Head of Public Policy at CIPD, Ben Willmott said:

The Code promotes good practice, making clear employers should always seek to agree any changes to terms and conditions with employees and that ‘fire and rehire’ should only be used as an absolute last resort.

It highlights the importance of early and meaningful consultation with employees to maximise the chances of finding alternative solutions which can lead to agreement over proposed changes.

It also emphasises that Acas has a key role to play and should be contacted by an employer for advice before it raises the prospect of fire and rehire with the workforce.

The Government previously asked Acas to produce guidance for employers on fire and rehire practices, which was published in 2021.

Background:

• The consultation ran for 12 weeks, inviting views from the public and other interested groups on the new statutory Code.
• The Government has laid the Code of Practice in Parliament for approval by both Houses. Subject to that approval, the Code will then be brought into effect later in the summer.