Consultation Launched on ‘Fire and Rehire’ Code of Practice

Prompted by the high-profile, mass-dismissal of hundreds of workers executed by P&O Ferries last year, on 24 January 2023, the Government launched a consultation process on the proposed implementation of a draft, statutory ‘Code of Practice on Dismissal and Re-engagement’ (otherwise known as ‘fire and rehire’) (the “Code”).

The draft Code, which can be accessed here, sets out an employer’s responsibilities when seeking to change an employee’s terms and conditions of employment. At the heart of the Code is the importance of a “meaningful” consultation between employers and employees (or their representatives/trade unions, as the case may be). It highlights that a legally binding contract – whether verbal or written – should not be varied unilaterally (i.e., without an employee’s agreement). The Code provides guidance and recommendations as to how employers should deal with any disagreements that do arise, or steps to take if an agreement cannot be reached. In particular, it advises:

• if numerous changes are proposed to the terms and conditions, where possible, they should be implemented over a period of time rather than all at once (depending on the proposals in question);
• employers should inform employees that proposed changes will be kept under review so that original terms might be reintroduced or further amended if appropriate and where the original reason for changing the terms ceases to be relevant; and
• employers should actively re-examine their business strategy in the event an agreement cannot be reached given the potentially serious consequences for employees.

The Code would apply regardless of the number of employees affected by a proposed change and the business objectives or reasons for seeking to make the change.

The Code would not remove the existing legal obligations on employers in relation to ‘fire and rehire’ exercises, such as the obligation to carry out collective consultation where the number of employees affected warrants such a process, nor is it intended to apply where the employees concerned are dismissed by reason of redundancy.

Whilst the Code itself would not be legally binding, if implemented, it would be relevant in determining whether any dismissal as part of a ‘fire and rehire’ exercise has been implemented fairly under existing unfair dismissal laws. As with other statutory codes of practice, Employment Tribunals would also have the authority to increase any compensation awarded to an employee by up to 25% where they find that there has been an unreasonable failure on part of the employer to comply with the Code.

The Code is still in draft form and open for consultation until 18 April 2023. The final Code will need to be laid before Parliament before it comes into force. We do not yet know when that will happen.

Impact on schools

Schools should be reassured that the draft Code, if implemented, would not prohibit the practice of dismissing and re-engaging staff where agreement cannot be reached with regard to a change to terms and conditions of employment following a period of genuine and meaningful consultation – in contrast to the Labour Party’s pledge to outlaw the practice in its Employment Rights green paper. Rather, much of the Code demonstrates existing best practice. It does, however, emphasise that ‘fire and rehire’ should be used by employers as a “last resort” and only when all other options have failed to result in an agreement to the change.

In due course, schools will need to familiarise themselves with the provisions of the final Code and ensure it is followed when a potential dismissal and re-engagement situation arises – for example, prior to consulting with staff over a possible withdrawal from the Teachers’ Pension Scheme.

We will provide an update to schools once the Government’s consultation response has been published. In the meantime, if you have any queries regarding the consultation or dismissal and re-engagement generally, please contact Hannah Wilding.