Fire and rehire code of practice

A revised code of practice covering dismissal and re-engagement (commonly known as fire and rehire) has been published which will come into force in the summer of 2024.

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 code of practice 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. It seeks to ensure dismissal and re-engagement is used only as a last resort. It will apply regardless of the number of employees affected (or potentially affected) by the employer’s proposals, and regardless of the employer’s reasons for seeking changes to its employees’ terms and conditions.

In undertaking a ‘fire and rehire’ exercise, an employer must provide the relevant employees or their representatives with ‘as much information regarding the proposals as reasonably possible’ and ‘as early as reasonably possible’ so that the employees/representatives can engage in ‘meaningful’ consultation. The revised code states that it is ‘good practice’ for that information to be provided in writing.

If it becomes clear that the employees (or some of them) do not agree with some or all of the changes, then the employer must still re-examine its proposals, taking into account any feedback received from employees/representatives. However, it does not need to re-examine its business strategy.

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. While technically still in draft form, the code is very unlikely to alter before being brought into force.

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.

In response to the consultation on the code, some changes have been made. For example:

  • It has been amended to clarify that, while it will not apply where an employer is only envisaging making employees redundant, in scenarios where an employer is envisaging both redundancy and dismissal and re-engagement in respect of the same employees, the code will apply for as long as dismissal and re-engagement remains an option.
  • The section on contacting ACAS has been strengthened so that employers should contact ACAS before raising the prospect of dismissal and re-engagement, but clarifying that this does not change the general position that ACAS can be contacted wherever the code applies.