Government publishes revised "fire and re-hire" Code

In 2022, following public outrage when P&O ferries dismissed some 800 of its staff, the government announced that it would be publishing a new statutory code on the practice of dismissal and re-engagement (also known as ‘fire and re-hire’) to change employee terms and conditions. The government did not consider it appropriate to ban the practice altogether.

The government consulted on a draft version of the statutory code between January and April 2023. Its response to that consultation, together with a revised draft code (the “Code”), was published last week. The Code is shorter than the original draft and has been made less technical and easier to follow.

Scope of the code

The Code sets out guidance for employers to follow when they are: (i) considering changing employee terms and conditions, and (ii) envisaging that they may use dismissal and re-engagement if an agreement on the proposed changes cannot be reached.

The Code will apply regardless of the number of employees affected by the changes and the reason(s) for the changes. However, it will not apply where the only proposed reason for the dismissal(s) is redundancy.

An employee will not be able to bring a standalone claim for failure to comply with the Code. However, an Employment Tribunal will be able to take the Code into account as evidence in relevant proceedings and can increase any compensation awarded by up to 25% if an employer has unreasonably failed to comply with it.

Key points

Much of the guidance in the Code reflects what is already best practice for employers when it comes to changing terms and conditions of employment. Some of the key headline points from the Code are as follows:

• An employer should ensure that it is providing information to, and consulting with, appropriate individuals - either trade union representatives, employee representatives or individual employees. This will depend on the circumstances and any applicable legal obligations.
• An employer should provide as much information as it reasonably can (as early as it reasonably can), so that employees can understand the reasons for the proposed changes, ask questions and make counter-proposals. The Code sets out the information an employer should consider providing, such as who will be affected by the proposed changes and the business reasons for those changes.
• Consultation on the proposed changes should be for as long as reasonably possible and undertaken by the parties in good faith with a view to reaching an agreed outcome. The employer should genuinely consider any reasonable alternative proposals.
• An employer should not raise the prospect of dismissal and re-engagement unreasonably early or use the threat of dismissal as a negotiating tactic to put undue pressure on an employee where it is not envisaging dismissal as a means of achieving its objectives. Dismissal & re-engagement should only be used as a last resort.
• Once it is apparent that employees are not going to agree to all or some of the proposed changes, an employer should re-examine its proposals, taking into account any employee feedback. The Code sets out a number of factors for an employer to take into account during this re-examination process, such as the negative consequences of making the proposed change, whether its proposals could have a greater impact on some employees than others, and if there are any alternative ways of achieving its objectives.
• An employer should contact Acas before raising the prospect of dismissal and re-engagement with employees.

Next steps

The Code is now awaiting Parliamentary approval, and we anticipate that it will take effect at some point over the summer in 2024.

Co-author: Victoria Wenn.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at February 2024. Specific advice should be sought for specific cases. For more information see our terms & conditions.