The practice of ‘fire and rehire’ (also known as dismissal and re-engagement) can be used by employers to alter the terms and conditions of employees’ contracts of employment. 

According to Mark Stevens, senior associate at law firm VWV, it is generally used as a last resort, when a change that an employer wishes to make to a contract of employment cannot be agreed with employees. “As the name suggests,” he says, “the fire and re-hire process involves the employer giving notice and dismissing an employee, and subsequently offering to re-hire the employee on new varied terms.” 

He explains that the practice itself is lawful, but because it involves a dismissal, there is a higher degree of risk involved.

Unions have previously advocated outlawing the practice. Indeed, in May 2021, Unite the Union reported that it and 19 other unions, along with 140 MPs and lords, joined together to campaign against it. And following its increased use by employers to vary terms of employment, particularly in response to the pandemic, the practice has been gaining increased media attention and receiving more scrutiny.

ACAS REPORTS

As a result of the rising profile of fire and re-hire, the Government’s asked its conciliation service ACAS to gather evidence and report on its use.

The ACAS report, Dismissal and re-engagement (fire-and-rehire): a fact-finding exercise, took into account the opinions of various stakeholders, including employer bodies, trade unions, professional bodies and networks with advisory contact with employers (such as employment lawyers, accountants, HR and payroll services, academics, and ACAS senior advisers). It was submitted to the Government in February 2021 and the findings were published in June 2021. As Mr Stevens highlights: “The report noted a divergence in views amongst participants as to whether or not employers were using the pandemic opportunistically as a justification to force through changes to employment terms or, rather, whether the increase in the use of fire and re-hire seen over the past year was simply a fallout of genuine business pressures caused by the pandemic.”

the Government’s expectation is that employers should exhaust every avenue towards reaching agreement

He adds that the report found that views were equally mixed as to whether the practice should be reformed, and if so, how. “Findings,” he says, “ranged from feelings that fire and re-hire practices are never reasonable and should be outlawed by legislation, to those who believed that it could be useful when genuinely used as a last resort.” 

It shouldn’t surprise anyone that there were also concerns that reforms or a blanket ban could lead to less flexibility for employers, which could lead to businesses failing and redundancies.

THE OUTCOME

For the moment at least, the Government has confirmed that it does not intend to legislate to outlaw fire and re-hire practices. However, in his response to the ACAS report in the House of Commons, Paul Scully MP, parliamentary under-secretary of state for business, energy and industrial strategy, said the Government’s expectation is that employers should exhaust every avenue towards reaching agreement where it is necessary to change terms and conditions.

Mr Stevens, however, believes that one reason for inaction is the risk that reform in this area of employment law could result in more businesses failing. “The Government has asked ACAS to provide more detailed guidance on how and when termination and re-engagement should be used, and what is ‘good practice’ for employers,” he says. This further guidance is now on the ACAS website, under Acas publishes advice to help employers avoid fire and rehire practices.

But this doesn’t mean the subject is closed; the Government has said it will continue to work with ACAS on the issue. Paul Scully MP confirmed that “nothing is off the table”.

ADVICE FOR EMPLOYERS

As to what this means for employers, Mr Stevens says that whilst further ACAS guidance is awaited, “employers are strongly encouraged to be cautious when firing and re-hiring and to only adopt this approach when necessary and only if all other attempts to agree varied terms have been exhausted”. 

He says employers should also be mindful of the increased scrutiny of the practice, and his advice is clear: “When moving to terminate and re-engage, employers should ensure they have followed a fair dismissal procedure, including confirming there are sound business reasons for the change; engaging with affected employees; considering alternatives prior to deciding to dismiss, and offering a right of appeal.”

IN SUMMARY

Fire and re-hire is perfectly lawful if the process is carried out correctly. However, employers should be alive to the risks that it carries, both in terms of a tribunal case being brought against them and a judgment made in the court of public opinion.