Government Consultation into ‘Fire and Rehire’ Code of Practice Launched
Wednesday 22nd February 2023
The government has announced its intention to publish a statutory Code of Practice on fire and rehire to crack down on misuse by employers. A consultation into the draft Code of Practice has been launched and will remain open until 18 April 2023, with findings to be published in due course.
Facts
Following a number of high profile fire and rehire scenarios in recent years the government has vowed to take steps to prevent misuse of the practice by introducing a statutory Code of Practice. This follows the introduction of more detailed ACAS guidance on the matter in 2021, which stressed the importance of thorough consultation and described fire and rehire as a last resort. The ACAS guidance is not binding, and while the Code would not be legally binding either it would be a consideration in whether an employee has been fairly dismissed.
In some ways, the proposed Code is similar to the ACAS guidance already published. It sets out standards and guidance employers should meet when making changes to terms and conditions. There is an emphasis on meaningful consultation, which means approaching consultation in good faith and with a genuine openness to reaching an agreement, as well as transparency when dealing with employees. There is also emphasis on fire and rehire being a last resort and a reminder that ACAS can help to resolve conflict and with negotiation.
As drafted the Code would apply where employers seek to make changes to terms of employees’ contracts and envisage that if employees do not agree they will be dismissed, or offered engagement on new terms. It would not apply where the reason for the dismissal is redundancy.
It is anticipated that Code would apply regardless of how many employees were affected, so would need to be adhered to even where less than 20 employees are affected and the requirements for collective consultation are not triggered. Given the requirements for transparency and openness, the likely impact of this is that the level of information sharing required in the process will be similar to that required for collective consultation, regardless of the size of the group impacted by the change.
If negotiations with employees are not productive, the Code would require that employers revisit their business strategy and reasons for making the changes, to look for ways a compromise can be reached. The Code also suggests that employers should take steps to mitigate the impact of the changes on employees. This could take a number of forms. It could be a phased implementation of changes so they are more gradual, carrying out regular reviews with employees, or giving practical support such as assistance with relocation, counselling or career services.
Arguably the most important change for employers is that the proposed Code would see increased financial sanctions for failure to fairly apply the consultation process. Similarly to the ACAS Statutory Code on Discipline and Grievance, Employment Tribunals would have the power to uplift or reduce compensation by up to 25% for unreasonable non-compliance with the Code.
Comment
If introduced as drafted, the Code would be more onerous on employers and may make the consultation process longer and more detailed. However, there are a number of points which are not clearly explained the draft Code. For example, it is not clear:
- whether failure to involve ACAS in negotiations would be a breach of the code,
- to what extent an employer would be expected to revisit or change its business strategy in the event that agreement is not forthcoming,
- how far an employer is expected to go to mitigate the impact of the change to avoid being deemed in breach of the Code,
- how the Code would apply where new terms are being considered as an alternative to redundancy, and
- how the financial penalty will operate and whether tribunals would be able to make awards which exceed the unfair dismissal award caps. If so, this could increase an employer’s financial exposure significantly.
We would expect that these issues will be addressed in the government consultation process and hope to see clearer guidance on these points before implementation.
Fire and rehire can be a very useful tool for employers to make necessary changes to their business, however we have seen in recent years that it can be misused and that employees and the public are sceptical of the process. Employers should therefore be aware that new guidance will likely be introduced the near future and to familiarise themselves with the new guidance. The draft Code and consultation document can be found here, and will remain open for responses until 11:45 pm on 18 April 2023.
