Code of Practice on ‘Fire and Rehire’

James Howarth, Associate.

On 18 July 2024, the Statutory Code on Dismissal and Re-engagement (the “Code”) came into force – commonly referred to as the code on fire and rehire. The Code sets out how employers should act if attempting to dismiss and re-engage an employee to change the terms of their employment contract. We talked about the proposed updates in February 2024, which you can read about here.

Although the Code was a Conservative proposal, the new Labour government has decided to allow it to come into force. On the implementation of the Code, the Secretary of State for Business and Trade, Jonathan Reynolds announced that the whilst the Code does not go far enough to address the “scourges of fire and rehire”, it will at least provide some level of protection for workers, and improve their conditions until Labour can implement their own commitments on fire and rehire. In line with Labour’s manifesto, the Secretary of State has said that legislation will be implemented in the first 100-days to replace the Code with a strengthened version.

In summary, the key provisions of the newly implemented Code are:

• Fire and rehire should only be used as a last resort.
• Employers should contact ACAS before raising the prospect of fire and rehire with employees.
• The Code outlines that it is good practice to inform employees of any changes to their employment contract in writing, setting out as clearly as possible when the changes will come into effect and giving as much notice as possible.
• Employers should, in good faith, consult with employees ‘for as long as reasonably possible’ to agree changes to an employment contract, even where it is unlikely that the employees will accept the changes. There is no minimum period for consultation but the Code outlines that “a longer consultation period is likely to allow for more in-depth discussion and a deeper understanding of the rationale for the proposals and the nature and intensity of any objections”.
• Once it becomes clear to the employer that there are objections, they should look to re-examine any proposals. The code outlines that employers should consider:

◇ the objectives they are aiming to achieve;

◇ the negative consequences of imposing the changes;

◇ the risk to the employer’s reputation;

◇ the damage to relationships with employees and trade unions;

◇ the potential for employees to strike or engage in other industrial action;

◇ the risk of losing valued employees;

◇ the risk of potential legal claims;

◇ whether the proposals could have issues from employees when considering the Equality Act 2010; and

◇ whether there are any reasonable alternatives to achieving the employer’s aims.

•   If an agreed outcome cannot be reached, employers must ensure that they do not use the threat of dismissal as a negotiating tactic to pressure employees into accepting new terms. Dismissal should not be threatened if it is not a genuine consideration.

Failure to follow the Code will not be sufficient for employees to bring a stand alone claim to the Employment Tribunal but if an employee brings a separate claim (e.g. for unfair dismissal) and it is found that the employer did not follow the Code, the Employment Tribunal may rule that any subsequent award receives a 25% uplift. Similarly, if it is shown that the employee has unreasonably failed to comply, any award may be reduced by 25%.