Shall we just fire and rehire our employees?

Changing Employees’ Terms and Conditions

Where employers wish to make changes to an employee’s terms and conditions of their employment, the safest and easiest way to do so is by obtaining the employee’s agreement to the changes. However, when a new term is or appears less favourable to the employee, it will not be easy to obtain an employee’s consent even if appropriate consultation is carried out. In certain circumstances, if agreement cannot be reached, an employer can either unilaterally impose the change(s) or choose to terminate the employee’s existing contract and offer re-employment on new terms. The latter is known as “fire and rehire.” Both options are inherently risky and could give rise to various claims against the employer including wrongful dismissal, breach of contract, constructive dismissal and unfair dismissal.

Fire and Rehire

It has been suggested that an increased number of employers have been engaging in the controversial “firing and rehiring” practice and are attempting to enforce new terms and conditions to their employee’s contracts of employment where consent cannot or has not been obtained, to combat the business challenges faced by many organisations as a result of the pandemic. Some organisations have suggested that they are using this practice to minimise the number of job losses and redundancies, to harmonise terms and conditions, to introduce permanent or temporary contractual flexibility and to address changing customer or operational needs.

At the beginning of 2020, the Government, in conjunction with Acas carried out a review into this practice. Acas published its report on 8 June 2021 which highlighted that the “fire and rehire” practice remains controversial and should only be used as a last resort. The Government however recognised that abolishing the practice could result in a number of businesses failing and increase the number of redundancies, which would in turn increase the rate of unemployment.  Based on the report, their recommendation remains that employers ought to exhaust every avenue towards reaching an agreement with employees first before resorting to this tactic. Based on the conclusions reached, the Government confirmed that it would not introduce legislation to prevent this practice but rather has asked Acas to provide employers with better guidance on all options before considering “fire and rehire.”

Acas Guidance

Acas has now published its guidance on firing and rehiring practices, and you can find out more by clicking here.

In summary, this guidance outlines what employers should consider before making changes to an employee’s contract of employment and the necessary steps to undertake before any changes are effected or enforced. The guidance highlights that “firing and rehiring” is an extreme tactic that should only be used in rare and exceptional circumstances where all other avenues have been exhausted first as not only can it impact staff morale and organisational reputation; it also substantially increases the risk of employment claims and industrial action against the employer.

The key message is that before considering “firing and rehiring” an employee, employers ought to make every effort to come to an agreement and carry out a meaningful and thorough consultation with the individual(s), including collective consultation where more than 20 employees are affected by the change. Unfortunately, even the best practice will not eradicate all the risks involved in the practice. It is therefore advised to tread with extreme caution when considering utilising this practice and seek legal advice if an agreement with the workforce on proposed contractual changes cannot be reached.

Whilst this guidance goes some way to address the use of this practice and assist businesses, it is unlikely to end the discussion on “firing and rehiring” practices. Paul Scully (MP) confirmed that “nothing is off the table” and further reform or legislation may still be a possibility in the future if necessary. So we will have to watch this space.

If you are planning to change your employees’ terms and conditions of employment and are unsure about the process to follow, feel free to contract us on 0191 282 2880 and a member of the team will be happy to assist.

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