The use of "fire and rehire" tactics by large employers in recent months has generated a great deal of press coverage. The practice, also known as dismissal and re-engagement, can be used as a way of changing terms and conditions of employment. It is not new and has been widely used for many years. As the name suggests, the employee will be dismissed from their existing contract and immediately offered re-engagement on the new terms. If the employee chooses not to accept the new offer then they are dismissed.
Generally speaking it is not used in such a cut throat manner as the recent headlines have suggested. Employers will look to agree changes with their employees via either an individual or collective consultation process in the first instance. However, if agreement cannot be reached the employer has the option of either trying to unilaterally impose the changes or to terminate existing contracts and offer re-engagement.
The practice of dismissal and re-engagement carries with it more risk than being able to agree changes with employees. Employees who do not accept the offer of re-engagement may subsequently be able to bring claims for unfair dismissal. There may also be significant damage to employee relations going forward. As such, when used appropriately, it tends to be a last resort for organisations and not the go to first option.
In January 2020, ACAS were asked to investigate the use and prevalence of this practice and report its findings. Although the report was provided to the UK Government in February 2021, it was only more widely published in early June to allow ministers more time to consider its terms. The report shows that a perception has built up that some employers have been using the pandemic as an excuse to impose less beneficial terms and conditions, with the threat of fire and re-hire being used as a negotiating tactic. Not surprisingly there was no consensus amongst respondents as to whether steps should be taken to address the practice, with views being divided down anticipated employee/employer interest groups.
BEIS did not ask ACAS to make any recommendations on reforms but the report does record the ideas suggested by participants. These included enhancing the unfair dismissal regime, requiring tribunals to scrutinise an employer's rationale for changing terms and conditions, protecting continuity of employment in fire and rehire scenarios and strengthening consultation obligations where dismissals are proposed.
Not surprisingly, given an earlier indicated reluctance by the UK Government to intervene in commercial matters between employers and employees, there is no current intention to reform this area of employment law. The report expressed concerns that reform could result in more businesses failing resulting in greater job losses and the UK Government re-iterated this. The UK Government has asked ACAS to produce clearer, more comprehensive guidance to help businesses explore all options before turning to fire and rehire. The effect of the new guidance is to be monitored.
