Lydia Cammiade Associate
'Fire and rehire' in the spotlight: ACAS report on dismissal and re-engagement
What is “fire and re-hire”?
Fire and re-hire (also called dismissal and re-engagement) is one approach an employer may take when it wishes to make changes to the terms and conditions of employees’ contracts of employment. The employer will give notice to terminate employees’ existing contracts and offer re-employment on new terms.
Why might an employer use fire and rehire?
A business may take this approach for various reasons such as:
- A significant down-turn in revenue (e.g. during a recession) which means they conclude it is necessary to reduce costs (such as in relation to staff wages)
- To harmonise employees’ contracts across a business
- To impose certain additional obligations on employees that a business may desire, such as restrictive covenants
- To remove clauses which are undesirable to the business, e.g. a contractual bonus schemes
What does the ACAS report say?
The Government asked ACAS to investigate the practice of fire and rehire and their report was published on 8 June 2021. ACAS were specifically asked to look into whether the practice was new, its prevalence, the context in which it is used, and whether the Government should intervene in the practice.
Employer bodies, trade unions, advisory bodies (such as lawyers, accountants, and HR professionals), academics, and advisers from ACAS were consulted.
ACAS found fire and rehire has been around for many years but its use may have increased in prevalence during the Coronavirus pandemic.
ACAS were not asked to make recommendations about reform and no consensus was reached as to whether Government intervention was needed to address the use of fire and rehire.
The report did include suggestions for reform put forward by participants, including the following:
- Enhancing protection from unfair dismissal
- Requiring employment tribunals to examine an employer’s reasons for needing to change terms and conditions of employment
- Ensuring employees do not lose continuity of employment
- Imposing more onerous consultation obligations on employers
The full report can be read here.
How have the Government responded to ACAS’ report?
In response to the ACAS report the Government have indicated that they will not be introducing legislation to ban the use of fire and rehire. However, ACAS have been asked to produce comprehensive guidance to help employers explore alternative options before resorting to the use of fire and rehire.
What other options do employers have?
Fire and rehire does involve risks for the employer such as potential unfair dismissal claims and breach of contract claims. Further, given the controversy surrounding its use, it can put a significant strain on employee relations and lead to reputational damage for a business.
Alternatively, employers can impose changes on employees without agreement, however, this approach could also lead to claims, such as constructive dismissal.
Before taking the route of dismissal and re-engagement, or imposing changes unilaterally, employers should consider attempting to seek express agreement to changes to terms and conditions of employment. Transparency and communication around why changes are needed and providing incentives to agree to the changes can prevent problems arising.
Should you require assistance navigating changes to terms and conditions of employment, please do not hesitate to contact a member of our Employment team.
The information above is not and should not be taken to be legal advice. You should not take action or omit to take action based on this information. If you require any help on the issues raised above, please get in touch using the details above.