The shocking dismissal by P&O Ferries of 800 crew members without consultation in March 2022 caused a ripple of anger throughout the UK. In light of P&O’s actions, the Department for Business, Energy & Industrial Strategy (BEIS) has announced that a new statutory code of practice will shortly be put in place to clamp down on the tactic of fire and rehire.
The stated intention is that the code will reinforce government expectations for employers to behave reasonably towards their employers, and will put new pressure on the few “unscrupulous” employers that have previously disregarded those expectations.
It should be noted that whilst it is the catalyst for the new statutory code, P&O did not actually use “fire and rehire”; P&O simply fired its workers. “Fire and rehire” tactics involve an employer dismissing an employee and then re-engaging them on usually less favourable terms. Whilst not unlawful, the practice has been controversial for some time. ACAS published a report in 2021 which was critical of employers’ use of fire and rehire during the pandemic. Following this, ACAS published guidance on making changes to terms and conditions. This guidance focused on informing and consulting staff about changes. Fire and rehire was mentioned in this guidance as a “last resort” which should only be used after “all reasonable attempts” have been made to reach agreement through a “full and thorough consultation”. This guidance currently has no statutory effect.
How will the code work?
We await details of what the new statutory code will cover, but BEIS says that it will set out practical steps that employers can take to hold fair, transparent and meaningful consultation as and when terms of employment require change.
The code will also act as a deterrent against employers using “fire and rehire”, or using it as a threatening negotiation tactic. Tribunals and courts will be required to take the code into account when considering relevant cases, including unfair dismissal. They will have the power to apply an uplift of up to 25% of an employee's compensation where the code applies, and the employer unreasonably failed to follow it.
Despite the condemnation by BEIS, the fact remains that “fire and rehire” tactics will remain legal even with a new statutory code in place. The government confirmed that it had no intention of legislating against the tactic following the ACAS report last year, and clearly intends to hold this position. Whilst the emphasis remains on deterring employers from using “fire and rehire” tactics, the current commentary from BEIS suggests that it is still an acceptable strategy in a last resort scenario, such as if an employer is facing financial difficulties of some sort, and needs to urgently cut costs.
Alongside this new code of practice and financial penalty, employers are likely to be deterred from failing to consult by the reputational damage that P&O is clearly still suffering from, weeks after the mass sacking.