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11 Nov 2021

What is the current status of “fire and rehire” practices?

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Fire and rehire practices are commonly used by employers to change employees’ terms and conditions to introduce less favourable terms.  Where employers fail to obtain employee agreement to the changes they can fire and rehire immediately on the new terms (or dismiss and re-engage as it is known more formally).

Such practices have received a great deal of public attention and media scrutiny recently, particularly in light of the pandemic which saw household names such as Tesco, British Airways and British Gas using this strategy.  Changes on fire and rehire practices were also the topic of a Private Members’ Bill which has recently been blocked by the Government.  In this alert we give you a brief update on the current status of fire and rehire practices.

What are the recent developments?

ACAS evidence gathering

The Department for Business, Energy and Industrial Strategy asked ACAS to conduct an evidence gathering exercise on the use of fire and rehire practices. ACAS published their findings in June 2021 and set out some potential measures to address fire and rehire practices, including:

  • Possible legislative changes such as: protecting continuity of employment in fire and rehire scenarios; strengthening employers’ consultation obligations around proposed dismissals and tightening up the law around unfair dismissal.
  • Possible non-legislative changes such as: improved guidance for employers on relevant legal obligations and good practice; and publishing ‘name and shame’ data on employers’ use of fire-and-rehire practices on a government website.

In response to the ACAS findings the Government stated that it would not legislate yet to prevent this practice but requested ACAS prepare more detailed guidance on how and when dismissal and re-engagement should be used.

Employment and Trade Union Rights (Dismissal and Re-engagement) Bill

A Labour MP sponsored the “Employment and Trade Union Rights (Dismissal and Re-engagement) Bill” which would discourage the use of fire and rehire practices and would grant additional protection to those affected by the practice.  On 22 October 2021, the Government ordered Conservative MPs to oppose the Bill and the Bill was blocked on its second reading.  This means the Bill now falls to the bottom of the list and is unlikely to progress any further1.

What does this mean for employers?

While a much talked about and emotive topic, nothing has changed for now.  In short, employers can still use the fire and rehire tactics but should be aware that this may cause adverse publicity and have reputational consequences. 

There is also the risk of legal claims.  An employee could argue that the dismissal (as part of the dismiss and re-engagement practice) is unfair, and provided they have 2 years’ service, they could bring a claim for unfair dismissal.  Given that alongside the dismissal they were offered immediate re-engagement this would limit their losses to some extent.  However, if the re-engagement terms include a significant salary reduction the employees may have substantial continuing loss.  An employer would likely rely on “some other substantial reason” as a fair reason for the dismissal and point towards a claimant’s duty to mitigate their loss. An employer should also follow a fair procedure during any fire and rehire practice, to avoid any dismissal being procedurally unfair. 

Whilst fire and rehire practices are not in themselves unlawful, they can expose employers to legal claims.  We advise employers to take legal advice when considering any such practices. 

For more information on the topics covered in this alert please contact Kate Brearley, Leanne Raven or your usual Stephenson Harwood contact.

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KEY CONTACT

Kate Brearley

Kate Brearley
Partner

T:  +44 20 7809 2107 M:  Email Kate | Vcard Office:  London

Leanne Raven

Leanne Raven
Senior knowledge development lawyer

T:  +44 20 7809 2560 M:  +44 7827 353 108 Email Leanne | Vcard Office:  London