Fire and rehire – code of practice creeps closer

Having launched a consultation on its proposed Code of Practice on “fire and re-hire” practices, the Government has now collated responses and published its updated draft Code.

Its stated intention is for the Code to be into effect by summer 2024.

The status of the Code will not change.  It will not:

• prevent termination and re-engagement exercises to implement changes to employment contracts; or
• give rise to stand alone claims for “failure to follow the Code”

It will:

• be a framework for employers to follow when seeking to change terms and conditions of employment;
• be taken into account by a Tribunal in determining whether an employer has followed a fair process when terminating and re-engaging in order to implement change;
• enable Tribunals to increase awards of compensation by up to 25% where an employer has unreasonably failed to comply with the Code (and reduce compensation by up to 25% if an employee has unreasonably failed to comply with the Code)

The consultation has not resulted in any fundamental changes to the proposed Code, but there are some changes:

• The list of information that an employer should consider providing is now consolidated into one list:
  • What the proposed changes are
  • Who will be affected
  • The business reasons for the changes
  • The anticipated timings and the reasons for the timings
  • Any other options that have been considered
  • The next steps
• The original draft Code suggested that where employees did not wish to accept changes, the employer should re-examine its business strategy. The revised Code requires the employer to re-examine its plans (but not necessarily its business strategy)
• Factors that should be taken into account when re-examining plans are:
  • The employer’s objectives
  • The negative consequences of imposing the changes, which could be:
    • Risk to reputation
    • Damage to relationships with workforce and trade unions
    • Potential for industrial action
    • Risk of losing valued employees
    • Risk of legal claims
  • Whether the proposals could have greater impact on some employees than others
  • Whether there are reasonable alternative ways of achieving the objectives
• The phasing in of changes is now a best practice recommendation, rather than an obligation
• The paragraph on contacting ACAS has been amended in the hope that ACAS involvement can help the parties. It suggests that ACAS should be contacted before the employer raises the prospect of dismissal and re-engagement.
• The Code still makes clear that dismissal and re-engagement should be a last resort.

Whilst the Code will not be implemented until the summer, we would recommend that it is considered by any employers considering significant changes to terms and conditions that might be implemented by way of termination and re-engagement. It sets out expectations as to how these exercises should be approached (and much of its content reflects current best practice in any event). Following the principles of the Code in relation to current exercises may assist an employer to defend claims that arise.

If you have any queries you would like to discuss regarding the contents of this article, please contact Rena Magdani or Matt McBride.

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