Fire and rehire: How to keep your boat afloat

P&O Ferries decided to unceremoniously dismiss a huge tranche of their port staff in mid-March: no warning, no consultation. It then set about, we understand, hiring agency workers on pitiful wages from Europe. It shone the light again on the practice of ‘fire and rehire’ although in P&O’s case the latter has yet to materialise!

What is fire and rehire?

The practice of ‘fire and rehire’ is the process unscrupulous employers sometimes use to force contractual changes onto employees. If employees refuse to sign new contractual terms – be they concerning, pay, working hours etc. – they are dismissed and then offered re-engagement on the new terms. That said, the process of dismissal and re-engagement is not in itself wrong if the employer has properly consulted about the changes they are seeking to introduce and only once this consultation fails to achieve agreement to the new terms does the employer dismiss employees who unreasonably refuse. Obviously, to avoid any unfair dismissal claim there must be a fair reason for dismissal (usually SOSR in these circumstances) and a fair dismissal process must have been followed including a right of appeal.

Recent activity and statutory code

Whilst this practice is by no means a new one, it has received increased attention over the last couple of years. The pandemic has put more employers under financial pressure, and many have sought to change the terms and conditions of their employees in response to that pressure. ACAS provided a report to Parliament in June last year noting its concerns that the practice was being used more frequently and with lessening regard for employees’ rights and well-being. The Government in response announced it would not legislate to prevent fire and rehire and asked ACAS for more guidance. However, on 29 March 2022, with the backdrop of the P&O debacle, it was announced that a Statutory Code of Practice would be published to address this practice. The Code (yet to be published) will include practical steps that employers should follow in terms of fair and transparent consultation on any proposed changes to employees’ terms and conditions. Tribunals and courts will be required to take the new code into account when considering their decisions on issues such as dismissals. As with other codes, where the tribunals consider an employer has unreasonably failed to follow the code there may be an uplift in compensation.

What does this mean for the future?

The practice of dismissing and then re-engagement remains lawful and can be a necessary evil on occasions. The process that the Government wants to stamp out is the misuse of this process; the reliance on this as the first resort with no consultation. If you are in a position where for whatever reason you need to change employees’ terms and conditions, remember the following:

• Examine and document your reasons for the change – are there no other ways around it?
• Consult with employees providing information and explanations – do what you can to take them along with you – do not assume no one will want to sign up to the new terms
• If some staff will not sign new terms, treat it like any other dismissal; follow a fair procedure, and give staff the right to appeal any decision and sufficient notice.
  
  

If you would like any more information on this issue please contact Jainika Patel.

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