Despite the introduction of the Government’s Furlough Scheme in March 2020, the months following the Covid-19 outbreak were an extremely worrying time for employers, many of which had to make crucial long-term decisions to ensure the survival of their businesses.
What is ‘Fire and Rehire’ and how does this benefit employers?
A common tactic employers used was to dismiss employees and offer them immediate reinstatement on a new contract that incorporated the changes they wanted to make: commonly referred to as ‘fire and re-hire’.
This heavily benefitted employers as it enabled them to unilaterally impose worse contractual terms (such as a reduction in contractual hours or benefits) on employees who, at the time, were desperate to remain in employment given the uncertainty surrounding the pandemic.
This method of enforcing contractual change does not, however, come without risk. Providing the correct notice is given, the employer is able to avoid breach of contract or wrongful dismissal claims, however employees can still bring claims of discrimination and if the employee has more than two year’s continuity of employment, potential unfair dismissal.
In June 2021, ACAS performed a fact-finding exercise on the use of fire and re-hire, the outcome of which showed that it is often used to avoid costly redundancy processes but that it is mostly used as a ‘smokescreen’ to diminish workers’ terms and conditions.
6 months down the line, ACAS have published updated advice to help employers avoid fire and rehire practices. In this guidance, they urge employers to:-
- Thoroughly explore all other options first and make every effort to reach agreement with staff on any contract changes;
- Where changes are required, make efforts to consult with employees and their representatives in a genuine and meaningful way to prevent conflict – this enables staff to understand the reasons for change and allows them to share their views and build trust;
- Provide clear information as early as possible on any proposed changes, including explaining what other options have been explored and why they are not considered appropriate;
- In the event that the parties are struggling to reach agreement, to keep discussions constructive, explore alternatives and stay focused on reaching a consensus;
- Ensure that any relevant trade union representative is informed if the proposed changes are covered by a collective agreement.
The advice document that accompanies and expands on the above guidance can be found here.
Failure to properly consult on contractual changes can result in a variety of costly claims being brought, such as unlawful discrimination (overlooking those who are absent on maternity /adoption leave etc), constructive dismissal and unfair dismissal claims – on top of the potential reputational damage and decrease in overall staff morale.
It is important to take advice early if any changes are being contemplated, to ensure compliance with best practice and to avoid the risk of such claims. For more information on this or to discuss any similar issues your business is facing, please contact Burnetts Employment and HR team at firstname.lastname@example.org
or 01228 552222.