Fire and Re-hire – Where do employers stand?

Insights - 28/05/2021

Fire and re-hire is an approach used by employers to dismiss and then offer to re-engage employees on often less favourable terms and conditions of employment.

The economic impact of the Covid-19 pandemic has led to many businesses having to make changes to their terms and conditions of employment. This may be to preserve jobs; for operational reasons; or simply to increase profits. The changes often include reductions in pay or hours of work or revised duties and responsibilities. According to research by the Trade Union Congress, 1 in 10 workers have been hit by the fire and re-hire approach since the first lockdown in March 2020.

Many well-known employers including Heathrow Airport, British Airways and British Gas have been criticised in the media and by trade unions for using the controversial approach. British Gas dismissed around 400 of its gas engineers for refusing to sign revised terms of employment which involved an increase to their working hours without additional pay and lower pay rates for working on weekends and public holidays.

The owner of British Gas, Centrica, reported that it had lost three-quarters of its market value over the last 5 years and that the changes to terms and conditions were necessary in order to protect jobs and the company.

Dismissing and re-engaging employees on new terms is a risky approach. Employees who are dismissed could bring claims for unfair dismissal (subject to their having a minimum of 2 years’ service) and wrongful dismissal (if the dismissal takes place without notice). More broadly such a strategy can damage employment relations (not just with those directly affected) and inflict reputational harm.

It is unlikely that any significant and adverse changes will be authorised by the employee’s contract of employment. The best and simplest way to implement changes to terms and conditions of employment therefore is to obtain express written agreement to the changes from the affected employees. See one of our previous articles – Tricky Issue – Changing Terms of Employment – for more detailed guidance on how to implement changes to terms and conditions of employment.

If employees are resistant to the proposed changes following a period of consultation, an employer can then dismiss and propose to re-engage those employees on new terms, often as a last resort.

If faced with a resulting unfair dismissal claim, an employer would need to satisfy a Tribunal as to why the changes were required and that it acted reasonably and consulted with the affected employees in order to show that it was fair and reasonable to treat the employee’s refusal as justifying dismissal.

An employer is more likely to succeed if it can show that it was able to secure the consent of a substantial majority of the workforce to the proposed changes. This will make it harder for those who did not agree to the changes, to argue that their dismissals were unfair. British Gas reported that 98% of their employees agreed to the new terms and that the remainder 2% were dismissed and offered the new terms.

The practice is already banned in Ireland and Spain. There have been growing calls from unions to outlaw the approach in the UK. This led to a private members bill being introduced to prohibit its use (although it is unlikely that this will pass through all the parliamentary stages). During the Parliamentary debate, Business Minister Paul Scully acknowledged that the Government must protect employees from unfair practices but must also allow businesses to take the difficult decisions necessary to preserve their commercial viability.

The Government was urged to legislate to restrict the practice as part of the Queen’s Speech on 11 May 2021. No employment legislation was announced however. It seems the Government has decided not to take any action to outlaw the approach for now at least. With the controversy around the practice likely to continue, we anticipate there is more to come on this matter.

If you require legal advice on dismissal, advice on changing terms and conditions of employment or any of the specific issues raised in this blog contact your usual Morrisons adviser or Mel McCrum Head of the employment team at [email protected]

Disclaimer:

Although correct at the time of publication, the contents of this newsletter/blog are intended for general information purposes only and shall not be deemed to be, or constitute, legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article. Please contact us for the latest legal position.