Dismissal and re-engagement under fire

The government has published an updated draft Code of Practice on “dismissal and re-engagement” procedures, better known as “fire and rehire”. Employment tribunals will have the authority to increase an employee’s compensation by up to 25% if an employer is found to have unreasonably failed to adhere to the Code. The new Code is intended to safeguard employee rights while also “respecting business flexibility”.

We have summarised the key points you need to be aware of:

• Employers are now required by the Code to reach out to Acas before raising the possibility of dismissal and re-engagement with their employees, strengthening the original draft guidance.

• The Code now advises that it is best practice for employers to provide information in writing to employees. It gives guidance on the sort of information employers should provide, advising that they share as much information as reasonably possible. However, it does not mandate information that employers must provide.

• The original draft Code’s mandate for phasing in changes has been softened to a recommendation rather than a requirement.

• The Code is not applicable in cases of redundancy alone. However, if both redundancy and dismissal and re-engagement are being considered, the Code will remain relevant as long as dismissal and re-engagement is an option.

• Employers are expected to engage in consultation for “as long as is reasonably possible in good faith, with a view to reaching agreement”. Unlike collective redundancy, there is no minimum consultation period set out in the Code. We anticipate there will be many arguments over just how long is “as long as reasonably possible” that will require guidance from the courts in due course.

• Employers must avoid using the threat of dismissal as a negotiating tactic to pressure employees into agreeing to new terms and conditions in circumstances where the employer does not envisage dismissing them. The Code sets out a fine line to tread between being clear that the employer intends to use dismissal and re-engagement if it cannot reach agreement and not raising the prospect of dismissal unreasonably early.

• Employers should genuinely consider any reasonable alternative proposals to dismissal and re-engagement.

• The original draft required employers to reconsider both their plans to dismiss and re-engage and their wider business strategy if employees or their representatives do not agree to some or all of the proposed changes. This has been changed in the updated draft so that employers need only reconsider their proposals to dismiss and re-engage and, in doing so, consider the feedback they have received.

• Dismissal and re-engagement should be considered a measure of last resort. However, this does not mean that the situation must be so critical as to be necessary for the survival of the business itself.

• The Code indicates it is good practice for employers to invite feedback about the changes as employees adapt to them and consider what they can do to mitigate any negative impacts on employees.

The government expects to bring the Code into force by summer 2024, once Parliament has approved it.