Dismissal and re-engagement: refusing Covid changes

An Employment Tribunal has held that the dismissal of a solicitor for ‘some other substantial reason’ was unfair. The dismissal was part of a ‘dismissal and re-engagement’ procedure, intended to implement changes linked to Covid 19. The case is of particular interest given the backdrop of the pandemic and recent criticism of what the press has described as ‘fire and re-hire’ tactics.

Background

For a variety of reasons, employers sometimes need to vary the employment contracts of their staff.  If the change cannot be made under a variation clause in the employee’s contract, or by agreement, employers may follow a dismissal and re-engagement procedure.

This involves dismissing the employee under their original contract, and then immediately offering them the same role under the amended terms.

The potentially fair reason for the dismissal is ‘some other substantial reason’ or ‘SOSR’ (under section 98 of the Employment Rights Act 1996/ article 130 of the Employment Rights (Northern Ireland) Order 1996).  The employer must then show that dismissal was reasonable in all the circumstances, ‘in accordance with equity and the substantial merits of the case’ (section 98(4) Employment Rights Act 1996/ article 130(4) of the Employment Rights (Northern Ireland) Order 1996). 

The employer's decision to dismiss must fall within the ‘range of reasonable responses’ open to a reasonable employer. A tribunal will look for a sound business reason for the change and will examine whether the employer followed a fair procedure.

In Khatun v Winn Solicitors Limited, an Employment Tribunal considered whether an employer had acted fairly in dismissing an employee under a SOSR / dismissal and re-engagement procedure. The employee in question had refused to agree to a variation of her contract, which was proposed in response to pressures on the business caused by the Coronavirus pandemic.

Facts

Ms Khatun was employed as a solicitor at Winn Solicitors Limited. In March 2020, in response to the first national lockdown, the firm decided to make changes to allow for greater workforce flexibility, furloughing 50% of their staff.

The staff still working were expected to ‘babysit’ the cases of the furloughed staff and agree to a variation of their employment contract, requiring them to go onto furlough leave or have their hours and pay reduced, on five days' notice.

The following series of events occurred after the decision was made to vary employees’ contracts of employment.

• On 23 March 2020 Ms Khatun’s Head of Department explained to her that all staff would need to agree to the variations, which were non-negotiable, or face immediate dismissal.
• On 24 March 2020, the Head of Department sent the contract variation to all staff by email, explaining that staff were to sign it within 24 hours or it was highly likely that they would be dismissed.
• On 25 March 2020 Ms Khatun emailed the Head of Department, to explain that she could not agree to the variation of contract. After further email correspondence, the Head of Department had a five minute phone call with Ms Khatun, in which he re-iterated that the variation was non-negotiable and Ms Khatun would be dismissed if she did not agree to it. Ms Khutan said that she would consider the variation if and when the need for changes should arise.
• On 26 March 2020 Ms Khatun was dismissed.

Ms Khatun brought a claim for unfair dismissal.

Decision

An Employment Tribunal held that Ms Khatun’s dismissal was unfair.

The tribunal agreed with the firm that their reasons for implementing the variation were ‘sound, good business reasons’. However, the dismissal of the Ms Khatun was not a decision that fell within the ‘band of reasonable responses’ (see above).

In reaching this conclusion, the Employment Tribunal took into account the following factors.

• The firm’s argument that they acted reasonably, as they did not have time to negotiate with three hundred employees. 

The tribunal explained that the firm would not have needed to negotiate with three hundred employees; they would only have needed to have one meaningful discussion with Mr Khatun. The tribunal was taken aback by a firm of solicitors having ‘so little regard’ for contractual terms and for due process.

• There had been no meaningful consultation. 

The tribunal took the view that the meeting on the 23 March 2020 was a one-sided conversation was not a meaningful discussion with Ms Khatun.

• The firm did not engage in a reasonable process before dismissing Ms Khatun.

It was clear to the tribunal that the Directors of the firm had decided that if Mr Khatun were to disagree with the variation to her contract, they would immediately proceed to dismiss her, without any process being applied. The firm acted quickly in dismissing Ms Khutan within 48 hours after sending her the variation to sign and Ms Khutan had not been offered the right to appeal. A reasonable employer would have done more.

Comment

It is important to note that as this case was decided by an Employment Tribunal, which means it is not binding. So, another tribunal would be free to reach a different conclusion.

However, this case gives a strong indication of how another tribunal would respond, if confronted with similar facts. This judgment demonstrates the importance of carrying out fair, meaningful consultation, prior to the dismissal of an employee who refuses to agree to contractual variations triggered by a genuine business need.

This case is particularly relevant in light of Covid-19, as many employers have needed to implement rapid contractual changes in response to the economic challenges posed by the pandemic. Faced with workforce resistance, a dismissal and re-engagement process is often the only solution.  However, as the case above illustrates, it is somewhat complex and can be high risk.

Employers should also note that the use of this process has recently attracted negative commentary in the press and is currently under review by the government. A GMB Union survey found that 76% of UK public think that the dismissal and re-engagement process should be made illegal. This issue has been debated in Parliament, and has been reviewed in a paper produced by the conciliation service, Acas. We understand that this paper is currently being considered by the government, and is not yet available to the public. The government has said that it was publish its response ‘in due course’.

The full Employment Tribunal judgment in Khatun v Winn Solicitors Limited is available here.

We discuss dismissal and reengagement in our podcast episode on workplace technology trends and the risks that HR and legal teams need to be aware of.

Contributors: Natasha Whitham and Sarah Maddock

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at May 2021. Specific advice should be sought for specific cases. For more information see our terms & conditions.