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Fire and rehire - New Acas guidance

Fire and rehire - New Acas guidance

Beneficial variations to an employment contract held to be void where the principal reason is a TUPE

Acas recently published a new guide for employers on making changes to employment contracts. This guide has been created following a request from the government for clearer, more comprehensive guidance to help businesses explore all possibilities for changing terms and conditions before turning to the option of last resort - fire and rehire.

Where an employer wishes to make changes to terms and conditions of employment, there are a number of legitimate ways to seek to achieve this. The practice of dismissal and re-engagement (or fire and rehire) is one of the more controversial ways of making changes when they cannot be agreed between employer and employee. It involves dismissing employees (giving them appropriate notice) and then offering them a new job on the new terms. 

Fire and rehire is not a new practice, but in the last few years it has come more into the public consciousness. In January this year, a TUC poll found that the practice of fire and rehire has become widespread during the Covid-19 pandemic, with nearly one in 10 workers being told to re-apply for their jobs on worse conditions. The TUC reported that there was a disproportionate impact on BME workers, young workers and working-class people.  

In addition, there have been a number of high profile fire and rehire news stories. For example, British Gas in spring this year was in the headlines when it asked engineers to sign up to new contracts or risk losing their jobs. The new contracts required the engineers to work longer hours in addition to no higher rate of pay for shifts over weekends and bank holidays.

Acas produced a report earlier this year which suggested that some employers had been using the pandemic as an excuse to impose less beneficial terms, using the threat of fire and rehire as a negotiation tactic. The government responded by saying that it was unacceptable and even immoral to use fire and rehire as a negotiation tactic. However, they confirmed they would not legislate to make it unlawful. The government instead asked Acas to produce guidance for employers about when and how fire and rehire could be used.

Acas has now published a new guide for employers on making changes to employment contracts. Fire and rehire is not mentioned until very late on in the guide. The focus of the guide is on informing and consulting staff about changes, making compromises where necessary, keeping discussions constructive and making proposed changes more attractive. In the final section of the guide, it talks about fire and rehire sometimes being a possible option, but only where agreement cannot be reached after "extensive attempts". Acas says it should only be considered as a “last resort” after “all reasonable attempts” have been made to reach agreement through a “full and thorough consultation”.

The guide highlights that if an employer is proposing to dismiss (and then rehire) 20 or more employees within a period of 90 days or less, they will be under an obligation to collectively consult with employees – as they would for making redundancies in such numbers. Failure to collectively consult risks protective awards of up to 90 days full pay per affected employee.

Further, dismissal prior to re-engagement still requires correct notice to be given to the employee, there needs to be a fair reason for the dismissal and a fair procedure should be followed. The right of appeal against the dismissal should be given. On top of these significant practical and legal hurdles, Acas highlights the risks of proposing to fire and rehire including:

  • Damage to trust and working relations – immediate and long-lasting
  • Reputational damage – making it difficult to attract new employees
  • Losing valued people from an organisation – because they do not accept the offer or become disenchanted after accepting
  • Legal claims –  constructive dismissal, unfair dismissal and a failure to collectively consult
  • For unionised workplaces: industrial action – longer-term damage to relations with the union

Dismissal and re-engagement remains one of the options that employers can consider when looking to change terms and conditions. Where the other alternatives have been exhausted and changes are required to save a business, an employer may decide that all the risks reinforced by Acas are worth taking.

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