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Fire and Rehire: New Code of Practice
22nd July, 2024 by Anna Bithrey
On 18 July 2024, a new Code of Practice on Dismissal and Re-engagement (commonly known as the practice of “Fire and Rehire”) came into force. The Code includes recommendations for employers when considering dismissal and re-engagement and confirms that where an employer has unreasonably failed to follow the code of practice, an Employment Tribunal could uplift compensation awarded to an employee by up to 25%.
Information and consultation
The new Code of Practice applies to all circumstances where regardless of the number of employees affected or the business reason for the proposed changes to the affected employees’ terms and conditions, which means it will be relevant to any employer considering dismissal and re-engagement.
The key provisions of the Code are:
- Fire and rehire should only be used as a last resort and employers must consider alternatives to fire and rehire.
- Employers need to consult with affected employees for “as long as reasonably possible in good faith, with a view to reaching an agreed outcome” but the Code does not set a minimum consultation period.
- Employers should provide information to the affected employees as early as reasonably possible and should share as much information regarding the proposals as reasonably possible. The Code includes a list of the type of information that should be shared.
- If the changes are not agreed, the employer should re-examine its proposals, taking into account any feedback it has received from employees or their representatives.
- Employers should also not use the threat of dismissal as a negotiation tactic.
Failure to comply
Although failure to comply with the Code does not give rise to a claim in and of itself, where an employee brings another relevant claim (such as for unfair dismissal) and the claim concerns a matter to which the Code applies, a tribunal can either:
- increase any award it makes to an employee by up to 25% if the employer has unreasonably failed to comply with the Code; or
- reduce any award by up to 25% where the employee has unreasonably failed to comply with the Code.
However, the power for employment tribunals to apply the uplift or reduction to compensation that has been awarded for failure to follow collective consultation requirements (otherwise known as the “protective award”) has not come into force as this proposal did not receive approval from both houses of parliament before the general election.
Further reform
Whilst employers need to ensure they familiarise themselves with the new Code, it is worth noting that there will be further reform of the practice of fire and rehire in the near future as the King’s Speech announced the new Employment Rights Bill will contain provisions ending fire and rehire except where there is genuinely no alternative and we can expect a new Code of Practice will be introduced alongside this.
Anna Bithrey comments:
The wording of the new Code mostly sets out recommendations to employers as opposed to imposing new legal obligations. However, as many employers are already familiar with in relation to the failure to follow the ACAS Code on Disciplinary and Grievance Procedures, the ability for a tribunal to award a 25% uplift for an employer’s failure to follow the Code may have substantial ramifications where employers are unsuccessful in defending claims. Employers should review the Code in all circumstances where fire and re-hire is proposed and ensure their practices and procedures are compliant with it going forward.
If you have any questions on the new Code of Practice, please contact a member of the team here.
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