What The Crackdown On 'Fire And Rehire' Will Mean For Employers15th Feb 2023
Why Fire And Rehire Is An Appalling Strategy
Let’s get this crystal clear right from the start: firing and rehiring is an abhorrent practice. Employers who attempt it risk immediate ignominy and the impending threat of costly litigation.
The government is “taking strong action against unscrupulous employers that use the controversial practice”. It is drawing up a new statutory code of practice. A 12-week consultation is due to end in April 2023.
Last year P&O Ferries sacked 786 seafarers and replaced them with cheaper agency staff. “Having made no efforts to inform the Business Secretary at the time, they failed to follow best practice or do the right thing for their employees,” said the government last month in a press release announcing a “crackdown”.
Fire And Rehire: An ‘Absolute Last Resort’ Or An Unequivocal ‘No’?
Any employer who thinks that firing and rehiring is clever or socially acceptable needs to take a long, hard look at themselves in the mirror.
If that fails, the Chartered Institute of Personnel and Development offers the following advice: “Fire and rehire practices should only ever be considered as an absolute last resort if changes to employment contracts are critical and voluntary agreement is not possible.”
As a law firm, Coles Miller would strongly advise against using fire and rehire tactics. That advice is based on both legal and moral grounds.
Here’s how the law on fire and rehire is likely to change…
Government’s Fire And Rehire Code Of Practice
The government’s proposed code of practice will “crack down on firms mistreating employees and set out how they should behave when changing an employee’s contract.”
Employment tribunals would be able to take the new code into account when considering claims. They would have the power to increase compensation by 25% if an employer were found to be in breach of the code.
Soon after the consultation was launched, critics said the code of practice would not stop fire and rehire. Retail trade union Usdaw said the code was insufficient as a deterrent – and that firing and rehiring should be banned outright.
Varying The Terms Of An Employment Contract
Sometimes changing circumstances force employers to review employment contracts. In today’s troubled economic climate, some hard-hit companies are facing an unenviable choice – cut costs significantly or go out of business.
Other reasons for changing employment contracts can include the need to:
- change working hours or shift patterns
- increase flexibility to meet customers’ changing demands
- upskill or multi-skill the workforce
- create new restrictions following termination of employment (such as non-compete or non-solicitation clauses).
However, do not assume that a clause such as ‘The Company reserves the right to make reasonable changes to your terms and conditions of employment’ will automatically cover you as an employer. Tribunals won’t accept it if you have made major changes to working conditions.
You can change employment terms with the consent of the employees.
Changing Employment Terms With Employees’ Consent
All UK employers have a legal obligation to respect the rights of their employees, and this extends to the terms and conditions of work. When changing those terms, employers must seek the consent of the employee for any such changes to be legally binding.
You must ensure that any agreement regarding a change in employment terms is legally valid. You must:
- make sure that employees are fully aware of all aspects of the changes before signing off on them
- make it clear to employees what the new terms will entail once they are in place.
- ensure the agreement is agreed by both parties in writing.
If a unilateral alteration is made after an employee has already signed a contract then this could be seen as a breach of contract (or wrongful dismissal).
Changing Employment Terms Without The Consent Of Employees
This is extremely risky – and not recommended.
Here’s one scenario: the employee refuses to accept the change but you impose it anyway. The employee continues to work without further objection. If this continues for several months, they could be deemed to have accepted the change – and it would be incorporated into their contract of employment.
The length of the time period is an important issue but it has not been legally set in stone. It can vary, depending on the circumstances of each individual case.
An employee can continue to work under protest – and the employer could be in breach of contract. This could lead to:
- a claim in the civil court
- an employment tribunal claim for unfair dismissal.
Changing Employment Terms Without Consent: Rigby v Ferodo Ltd (1988)
The case of Rigby v Ferodo Ltd (1988) is an important example of how making unilateral changes to an employment contract can backfire – with expensive consequences.
Ferodo dismissed Mr Rigby after he refused to accept a five per cent pay cut. He then claimed unfair dismissal. The case ended up in the House of Lords.
The Lords ruled that Ferodo had no right to make such changes unilaterally where there was already an existing employment contract in place. Mr Rigby was legally entitled to claim his pay shortfall in full.
That decision set a precedent which still stands today: that any alterations to terms must be agreed upon by both parties before coming into effect.
Get Expert Legal Advice
If an employee refuses to accept new contract terms, employers have two choices:
- terminate their employment – but at the risk of triggering an unfair dismissal claim
- allow them to continue working under the terms of their old contract.
Above all, do not act in haste. Always get expert legal advice.
Contact Coles Miller Managing Partner Neil Andrews for help with employment contracts, terminating contracts of employment and making workers and employees redundant.