Fire and rehire: draft code published

A consultation has been published on a statutory code of practice covering dismissal and re-engagement (commonly known as fire and rehire).

The government committed to publishing such a code after the mass dismissals of hundreds of P&O workers in 2022 and the outcry which followed it.

The draft code (which is out for consultation until 18 April 2023), sets out detailed steps that employers should take when seeking to make changes to contractual terms, including providing information, engaging in meaningful consultation and exploring alternatives, and makes clear that employers should not use threats of dismissal as a negotiating tactic. Employment tribunals will have the power to increase an employee’s compensation by up to 25% if an employer unreasonably fails to comply with the code. They can also decrease any award by up to 25%, where it is the employee who has unreasonably failed to comply. The code will be brought into force ‘when Parliamentary time allows’. In a response to a Parliamentary question in November 2023, the government has indicated that its response to the consultation on the draft code and the final version of the code will be published in Spring 2024.

The code  does not outlaw the practice of fire and rehire. Nor does it impose any legal obligations on employers. A failure to observe its provisions does not, of itself, make an employer liable to legal proceedings. It also does not apply where there is a genuine redundancy dismissal.

As well as consulting fully and meaningfully with the workforce and/or unions, the code recommends that if agreement cannot be reached over changes to terms and conditions, the employer actively re-examines its business strategy in light of the potentially serious consequences for employees. Where an employer decides to press ahead with changes to terms and conditions, the code states that the employer should share as much information regarding the proposals as is reasonably possible and engage in meaningful and good faith consultation. The employer should consider any alternative proposals made by employees and be prepared to engage in a genuine exploration of whether they are workable or will meet the employer’s objectives. The code notes that to ensure that consultation is meaningful, it is important that employees understand the employer’s objectives and the nature of its proposals. It is also important that the employer is honest and transparent about the fact that it is prepared, if negotiations fail and agreement cannot be reached, to attempt to unilaterally impose changes or to dismiss employees to force changes through. As for dismissal and re-engagement, the code states that an employer who has participated in a thorough and open information and consultation process, has listened carefully to and explored fully any alternative proposals, and has concluded that it still needs to make changes to employment contracts, might consider this as a last resort.