What is fire and rehire?

Dismissal and re-engagement, otherwise known as fire and rehire, is the practice of an employer dismissing employees and rehiring them on new contractual terms that are usually less favourable. This practice is a tactic used by some employers when they want to change the terms and conditions of employment but cannot reach an agreement with the employee.

Is fire and rehire legal?

Dismissal and re-engagement is not unlawful. However, the practice is considered controversial by many and there have been public calls for it to be banned. While fire and rehire may not be illegal, using these tactics could leave employers facing contractual and statutory claims, such as unfair dismissal.

Use of the fire and rehire tactic can also damage an employer’s reputation and public image, employee morale and even business performance. It is therefore advisable that employers attempt all other options for negotiation first.

Recent fire and rehire examples

Fire and rehire tactics were employed by a number of employers during the pandemic to tackle difficult trading conditions. British Gas and British Airways are two significant businesses that proposed carrying out the practice, capturing media attention. Due to the public outcry, the government instructed ACAS to investigate the use of these tactics.

In March 2022, P&O Ferries dismissed over 800 crew members via a pre-recorded Zoom meeting. The employees were told that their current employment was being immediately terminated.

In part due to the media attention on this case and the public outcry, the UK government announced that a new statutory code of practice would be published to address the use of fire and rehire tactics and how employers should deal with changing terms and conditions.

2021 ACAS guidance

In November 2021, ACAS provided updated, non-statutory guidance on how employers should work with employees and unions to negotiate changes to terms and conditions. This guidance states that the practice of fire and rehire should only be used as a last resort, and only after the employer has made all reasonable attempts to reach an agreement on new terms through consultation with the staff and their representatives.

What is the new Code of Practice?

The government’s new Code of Practice will supplement the ACAS guidance and detail how employers should approach negotiations concerning terms and conditions changes. The Code of Practice outlines practical steps that employers should follow, as well as details on how to carry out transparent consultations with employees on any proposed changes. However, the new Code of Practice will not ban the use of fire and rehire practices.

When new terms are to be imposed via firing and rehiring, the employer will be expected to engage with staff throughout the process, even after terms have been agreed upon, and provide reasonable practical support for affected employees, such as phasing the changes or extending the notice period. Employers should also not use the threat of dismissal as a negotiating tactic.

Employment tribunals will be required to take failure to follow the Code of Practice into account for relevant cases such as unfair dismissal, similarly to how adherence to the ACAS guidance is consulted on disciplinary and grievance proceedings. An uplift of up to 25% of an employee’s compensation can be applied if the employer has unreasonably failed to follow the code.

The new code will not supplant any existing legal requirements that apply to the fire and rehire practice, such as the obligation in respect of collective redundancy consultation under the Trade Union and Labour Relations Act 1992.

The Code of Practice is still in draft form and remains open for consultation until 18th April 2023. Once the consultation has closed, the BEIS will consider the responses before a formal Government response is provided.

While fire and rehire practices are not illegal, the new Code of Practice will encourage employers to pursue all other reasonable avenues of negotiating new terms and conditions before resorting to firing and rehiring.

If you have any questions, you can contact our employment team.