Fire and Rehire: What is the Legal Position?
In theory, your employer has the power to terminate your employment contract and then offer to re-engage you on different terms and conditions. However, this is commonly done when there is no mutual agreement between the employer and the employee.
Due to the lack of agreement between parties, this may involve them in potential employment tribunal claims for unfair dismissal, possibly constructive dismissal, or other breach of contract claims. This may result in severe reputational damage to a business. Moreover, this strategy does not necessarily translate into better terms and conditions either. There is a high chance that the new terms after an employee is rehired may be less favourable as well.
The Fire and Rehire Trend
The practice of firing and rehiring employees has come to the attention of regulators and the Government since the Covid 19 pandemic. During this time, the practice increased due to the deteriorating financial and economic situation that businesses found themselves in.
In March 2022, the shipping company P&O Ferries sacked 800 members of its staff and employed different agency staff, which was widely reported in the media and caused the business widespread reputational damage. Although this was not a “fire and rehire” situation, it put the government under pressure to introduce safeguards for employees.
The existing ACAS advice aimed at employers avoided using fire and rehire practices, which was first introduced in November 2021. However, this will now be replaced by an enhanced and new statutory code that is yet to be implemented.
New Code Suggests More Transparency
The new code will expect employers to hold fair, transparent and meaningful consultations on proposed changes to employment terms. This is a code of good practice rather than a strict legal obligation on an employer. But an employment tribunal should take the code into account when dealing with unfair dismissal claims. Not following the code could result in an uplift of 25% in compensation if your employer unreasonably fails.
What does all of this mean for you if your employer decides they are going to terminate your employment contract and offer you a contract on less favourable terms? Steve Norton, a lawyer at Redmans, advises – “Your employer should first thoroughly explore all other options first. Thereafter, it is essential to try for an amicable agreement“. Remember, it is essential to discuss any proposed changes to your contract with you.
If there is a recognised trade union, there is usually an agreed mechanism for negotiating terms and conditions. So, arrangements can be made for consultation and negotiation through a union. However, where this is not the situation, you will need expert independent legal advice if faced with potential termination and possible re-hiring on less advantageous terms. Redmans Solicitors are expert employment lawyers who can offer you honest advice on your specific situation and any potential claim you may have.