Updated Code of Practice on Dismissal and Re-Engagement

The government has updated the Code of Practice on dismissal and re-engagement (pending approval by Parliament). A commencement order is likely to bring significant changes to how employers navigate this sensitive issue, possibly taking effect later this year.

The updated policy on dismissal and re-engagement, commonly referred to as ‘fire and rehire,’ recognises the potential for conflict between employers, employees, and trade unions stemming from the practice of dismissing and re-engaging employees. The Code aims to mitigate disputes and support fair outcomes.

This Code serves as a comprehensive guide for avoiding, managing, and resolving conflicts arising from fire and rehire practices. While non-compliance with the Code doesn’t automatically result in liability, it is admissible as evidence in legal proceedings, with relevant provisions taken into account. Furthermore, under section 207 of the 1992 Act, tribunals have the authority to adjust awards based on the degree of compliance with the Code, emphasising the importance of adherence to its guidelines.

One of the key reasons for this policy being updated lies in the context of specific cases during the COVID-19 pandemic, where fire and rehire practices garnered significant media attention. Concerns were raised regarding the use of dismissal threats as pressure tactics during negotiations over changes to employment contracts. The Code seeks to address these concerns by establishing clear standards for employer behaviour, promoting meaningful consultation, and encouraging the exploration of alternatives to dismissal and re-engagement.

Crucially, the Code strikes a delicate balance between supporting business flexibility and safeguarding employee rights. By emphasising the importance of meaningful consultation and discouraging premature dismissal threats, it aims to foster a fair and transparent employment environment. Ultimately, the Code represents a step towards improving industrial relations by promoting dialogue, fairness, and mutual respect between employers and employees.

Key Points

While the key points remain consistent with the original draft published in January 2023, several refinements have been made following a period of public consultation. Here’s a breakdown of the key points:

1. Early Intervention: Employers are now required to contact Acas at an early stage, before broaching the subject of fire and rehire with their workforce. This strengthened requirement highlights the importance of early intervention and mediation in resolving disputes.

2. Written Communication: It’s now considered good practice for employers to provide information in writing, ensuring clarity and transparency throughout the process.

3. Phasing-in Changes: The obligation to phase-in changes has been downgraded to best practice, offering more flexibility to employers but emphasising the importance of gradual implementation where feasible.

4. Applicability: While the Code does not apply in redundancy situations, it becomes relevant when both redundancy and fire and rehire are being considered. This ensures consistent standards of consultation and fairness, regardless of the circumstances.

5. Consultation Duration: Employers are required to engage in consultation “for as long as reasonably possible,” albeit without a specified minimum duration. This encourages meaningful dialogue while accommodating the diverse needs of businesses.

6. Prohibition of Coercion: Employers are explicitly prohibited from using threats of dismissal to coerce employees into accepting new terms and conditions. This safeguard aims to protect employee rights and prevent undue pressure in negotiations.

7. Exploration of Alternatives: Employers must explore alternatives to fire and rehire, engaging in constructive discussions with employees and trade unions to seek mutually agreeable solutions before resorting to drastic measures.

8. Last Resort: Fire and rehire should only be used as a last resort, emphasising the gravity of this decision and the importance of exhausting all other options beforehand.

9. Tribunal Consideration: While there’s no standalone claim for failure to follow the Code, tribunals can consider it in relevant cases, including unfair dismissal. Employers who unreasonably fail to adhere to the Code may face compensation uplifts of up to 25%.

As businesses prepare to navigate these changes, understanding and adhering to the updated Code will be important in creating positive workplace relationships and minimising the risk of legal challenges down the line.

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