New Statutory Code of Practice on fire-rehire

A parliamentary vote was held at the beginning of April on banning fire-rehire practices completely, driven by the Labour Party in response to the large scale redundancies of P&O Ferries staff.  However, the vote failed by 251 (against banning) to 188 (for banning), so new laws will not be implemented at this stage to prohibit the use of such tactics.

This week, the government announced plans to introduce a new Statutory Code of Practice for employers using fire and rehire tactics, in a bid to deter them from doing so and safeguard workers’ rights.

The use of fire-rehire practices has been widely criticised as a means of renegotiating contractual terms and conditions. In November 2021, ACAS published new guidance at the request of the government, which highlighted employers should only consider dismissing and offering to rehire someone on new terms as a last resort, if changes are critical and voluntary agreement isn’t possible. Before doing so, they must have made all reasonable attempts to reach an agreement through full consultation with affected staff members and their representatives in a genuine and meaningful way.

The Department of Business, Energy and Industrial Strategy (BEIS) is now going one step further to introduce a Statutory Code of Practice on dismissal and reengagement, under s203 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA). The Code will include practical steps that employers should follow in these situations.

Effective consultation can help maintain good workplace relations, as it allows staff to understand the reasons behind proposed changes and provides them with an opportunity to give their views. This can help to build trust and find a solution that works for everyone. Tensions can arise if employees feel that they have not had the opportunity to inform decisions around proposals or do not support the changes. This can result in staff feeling less committed, impact an organisation’s performance and increase the risk of tribunal claims or industrial action.

When claims are raised to the employment tribunal, the judge will refer to statutory codes when deciding the level of award an employee is entitled to. The most common statutory code is, arguably, the ACAS Code of Practice on Disciplinary and Grievance Procedures. However, the new fire-rehire Code will lay new consideration for employment tribunals to analyse. This means an employer may face paying out up to 25% more in compensation for not following the process set out in the Code. It is hoped this will act as a further deterrent to employers, to prevent them from abusing the fire-rehire process and treating employees unfairly.

The Government will be consulting on the draft Code later this year and will bring it into force as soon as parliamentary time allows. For now, businesses can continue to utilise fire-rehire approaches where necessary, but it’s important they understand the need to properly consult with affected staff members and the risks to the organisation if they don’t. In coming months, tribunals will likely be stricter when evaluating fire-rehire situations and be less lenient when considering the process employers followed to enforce changes to contractual terms.  

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