Fire and rehire involves terminating an employee’s existing employment contract and offering to rehire them on new terms, usually as a last resort, where an employer cannot make the proposed changes using existing powers in the employee’s contract and the employee has not given their agreement to the changes.
Fire and rehire has been increasingly used by businesses due to the financial impact of the Covid-19 pandemic.
Why do employers do it?
It could be to save costs, expand a service offering, it could even be for health and safety reasons. Whatever the reason, it must be clear, and management must be behind it. The reason is occasionally referred to as the ‘business reason’. There are a number of business reasons an employer could use, for e.g. changing working hours for health and safety measures or to make employees work at the weekend due to client demands.
There is no need for an employer to prove that the business reason is fair as there is nothing in the legislation or in case law which requires this. The employer must simply show a strong business reason for the change in terms of conditions. The employment tribunal will not be determining whether the business reason is strong but whether the employer thinks it is.
Is there an alternative to firing?
Employers do not set out to fire and rehire their employees. The need for employers to go down this route is often seen as the last option given the risks of unfair dismissal claims. There are also the employees to consider, they may not welcome being forced to change and it could result in industrial action, which could be detrimental to the employer’s business.
What employers should do first is consider whether the employees will voluntarily agree to the changes. An employer could offer something to entice the employees to agree to the changes for e.g., more holiday.
What happens if they do not agree?
Employers should consult with their employees to see if they are willing to enter into the changes. It will need to be clearly explained to the employees that if they do not agree then they could be dismissed. Consultation should be meaningful and best practice is for the employer to consider the employees arguments against the change and whether the proposed changes need to go ahead.
The employment tribunal will be looking to see if the employer considered alternatives to dismissal and if the employer’s actions for dismissing the employee for the business case is reasonable. If the alternatives are not feasible and the employees do not agree then they will be dismissed and offered the new terms.
Is changing terms and conditions a fair reason for dismissal?
Changing terms and conditions can be a fair reason for dismissal provided a proper process is followed. There are five fair reasons for dismissal, the fair reason, when using ‘fire and rehire’ tactics, is “some other substantial reason of a kind such as to justify the dismissal of an employee holding the position which the employee held.” Fire and rehire dismissals are often referred to as SOSR dismissals. SOSR dismissals do not trigger a redundancy payment.
The ACAS code of conduct does not apply to SOSR dismissals. However, employers should still use this as a guide when conducting consultation meetings. The tribunal will look favourably at employers who for e.g. offer the right to appeal even though they don’t have to. Indeed, it is never guaranteed that an employment tribunal will find that the SOSR dismissal is fair. However, following a proper process and adhering to employment best practice increases the chances of it being fair.
Firing and rehire can go wrong, there is always a risk of industrial action. A proper process must always be followed and there must be meaningful consultation with the employees. The business reason needs to be strong, and management need to agree with the business reason.
SOSR dismissal are complex, it is always to have a clear plan before implementing any changes. Our expert team of employment lawyers regularly advise both employers and employees on SOSR dismissals. Get in touch today if you have any questions.