Government Consultation on new “Fire and Rehire” Code of Practice

We all remember the controversy caused by P&O’s termination of more than 800 employees last year and the Government announced that it would introduce a Code of Practice on the controversial use by employers of “fire and rehire” to impose changes to an employees’ terms and conditions of employment.

This long standing practice has been used by employers seeking to change terms and conditions where they have been unable to reach agreement with employees. To implement the changes the employer can terminate the employees’ current contracts of employment and offer to re-engage them on the new terms. Employees who do not sign up to the new terms are deemed to be dismissed. Whether that dismissal is fair or unfair will depend on the particular circumstances.

The Government has now published the Draft Code of Practice on Dismissal and Re-engagement with consultation closing on 18 April 2023. The aim of the new Code of Practice is to set standards as to how an employer should approach such an exercise, however the Code is not “law” and does not impose strict legal obligations:

  • It will have to be taken into account in Tribunal proceedings (for example, claims of unfair dismissal);
  • If there has been an unreasonable failure to comply with the Code by an employer, any compensation awarded by the Tribunal can be increased by up to 25%
  • If there has been an unreasonable failure to comply with the Code by an employee, any compensation awarded by the Tribunal can be reduced by up to 25%
  • The draft Code also emphasises the need for the provision of information, consultation, and negotiation before an employer implements termination and re-engagement.

We will have to wait and see whether the draft Code will be amended following consultation and when it will be introduced. In the meantime, employers who wish to make changes to contracts of employment without agreement should seek advice to minimise the risk of significant legal and reputational damage.