The introduction of the new 'fire and rehire' code of practice

The practice of fire and rehire which involves dismissing and re-engaging employees (often as a means of changing their terms and conditions of employment), has received a lot of negative press in recent years. During the coronavirus pandemic for example, British Airways warned unions that if it could not reach an agreement over new terms and conditions, it would push through the issue by giving staff notice and offering them new contracts. Dismissal and re-engagement is a well-established and permissible legal mechanism, but some claim it has been abused by employers, as the threat of fire and rehire is often enough to ensure employees are ‘voluntarily’ agreeing to lower pay and reduced terms and conditions.

The public and many politicians were appalled by the British Airways saga and many other highly-publicised fire and re-hire scenarios. As a result, plans were made by the Conservatives to introduce a statutory code of practice on ‘fire and rehire’. This code - The Code of Practice on Dismissal and Re-engagement – has now come into force, as of the 18^th July 2024.

The code, which can be read in full here, shall be taken into account by employment tribunals in certain types of cases, such as unfair dismissal. Where an employer unreasonably fails to follow the code, the tribunals will now be able to uplift any compensation awarded by up to 25%.

The code demands that employers only use the mechanism of fire and rehire as a last resort, requiring them first to consult for as long as reasonably possible. However, the code does not set out defined parameters as to what might be long enough, nor does it set out a minimum consultation period.

The code also urges employers to explore alternative options to re-engaging on lesser terms and conditions, and suggests that employees should involve Acas at a formative stage.

Where an employer’s proposals are not agreed, the code tells employers to re-assess the proposals and contemplate any employee feedback. Employers are advised not to use threats of dismissal to force employees into agreeing to new terms and conditions

When agreement has been reached on the terms, the code encourages employers to implement them in phases.

The code is unlikely to have a substantial impact on the practice of fire and rehire, and it has been accused by unions of lacking teeth. Having said this, there is uncertainty around how long the code will apply for, given that the Labour government that is now in charge has made promises to scrap ‘fire and rehire’ practices entirely.

The current Labour Government has said it will “reform the law to provide effective remedies against abuse and replace the inadequate statutory code brought in by the Government, with a strengthened code of practice.” We will need to wait to see if Labour’s new code of practice will have teeth where the current code is said not to.