Fire and rehire is in the news and on the rise. While more associated with high street retailers, the practice has been used increasingly by employers across multiple industry verticals including banking, writes Douglas Blakey
Fire and rehire is legal and in certain circumstances, valid. But it remains controversial. It is not only a potential legal minefield: if an employer gets it wrong, the results can be material damage to a firm’s brand and image. Fire and rehire is not new but is on the rise. During the pandemic there have been a number of high-profile disputes in the UK. For example, Centrica, better known to the public as British Gas endured weeks of negative publicity arising from a dispute with the GMB Union. Indeed, the dispute ended up with British Gas workers going on a 42-day strike.
At issue was a demand by British Gas to impose a 15% pay rates. In addition to the negative publicity, British Gas accumulated an arrears of customer service visits. Not only were hundreds of thousands of customers affected, British Gas had to suspend the sale of its standard boiler service insurance.
Head of Employment Law at the London office of Royds Withy King, Richard Woodman, speaks with RBI editor, Douglas Blakey
Fire and rehire: 9% of employees impacted says TUC
Meantime, British Airways incurred the wrath of the all-party Transport Select Committee for its handling of a fire and rehire disagreement with Unite the Union. In particular, BA cargo workers ended up on strike, relating to a fire and rehire disagreement.
An accurate assessment of the number of employees impacted by fire and rehire is not known. But in January 2021, the TUC estimated that some 9% of workers had been told to re-apply for their jobs on worse terms since March 2020. Notably, the figure is higher says the TUC, for young and BME employees.
Other notable recent fire and rehire disputes have involved shoe retailer Clarks, Argos, Tesco and Asda. The banking sector is not immune from the use of fire and rehire but to date has avoided such high-profile disputes.
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What is fire and rehire?
At its simplest, fire and rehire means that an employer dismisses an employee and offers to rehire them on new terms. In real money that means new terms that are more favourable toward the employer.
In itself the practice is not unlawful. But and it is a big but: it still involves a dismissal. Get it wrong and the employer faces a claim for unfair dismissal. If there are enough employees involved, the employer also has a legal duty to undertake collective redundancy consultations first.
Richard Woodman is head of employment law at the London office of solicitors Royds, Withy, King. He tells RBI employers should use such an approach carefully and that it should be used as a last resort.
He says that fire and rehire can be used effectively to force through changes to employees’ terms and conditions.
But the Employment Tribunals will always scrutinise and challenge an employer’s justification for firing and rehiring. If there is good reason to do it and a proper consultation process has been undertaken before any dismissals, it may well be lawful.
Use as a last resort: Richard Woodman of Royds Withy King
“It should, however, always be a last resort, as dismissing an individual will give them the right to claim unfair dismissal if they have two years’ service and if 20 or more employees are dismissed employers may face expensive failure to collectively consult claims.”
Woodman adds that employers must ensure that employees are fairly dismissed from their original contracts, with fair reason and following a fair procedure. They must be dismissed on the appropriate notice and offered the opportunity to accept or reject the new terms.
“If accepted, their continuity of employment continues uninterrupted. If rejected the employee’s contract ends.”
Employees must be asked for their views and willingness to agree contractual changes. Although preferable, obtaining employee agreement to contractual changes is not always possible. Only if agreement is not possible with some of the employees, and the employer has to implement the changes, should the fire and rehire route be adopted.
Last year, the Department for Business, Energy and Industrial Strategy asked ACAS to review fire and rehire practices. ACAS reported on 8 June.
ACAS’ report suggested possible options for legal reform. For example, it suggested options such as:
- tightening up the law around unfair dismissal;
- enhancing the requirement and capacity for employment tribunals to scrutinise business’ rationale for change in relevant cases;
- protecting continuity of employment in ‘fire and rehire’ scenarios;
- strengthening employers’ consultation obligations around proposed dismissals;
- offering improved guidance for employers, and
- using data on ‘fire and rehire’ to inform decisions around public procurement and access to government funding
Political appetite to legislate?
Woodman adds that there doesn’t seem to be any political appetite to ban fire and rehire at the moment. To do so would restrict employers that have no option but to change terms and conditions without employee agreement in a rapidly evolving marketplace.
But a number of opposition backbench MPs have been on manoeuvres. An SNP MP introduced two Private Members Bills to reform the law on dismissal and re-engagement. Neither Bill obtained a Second Reading and the Bills will fall. A Labour MP also initiated a Westminster Hall debate in April on the same subject.
The position remains that any bank should consider the fire and rehire route with caution. A briefing with Woodman or one of his peers would be prudent. It not only would minimise the danger of a high-profile dispute and PR damage. It may avoid an expensive day out in court.