Following the shock of P&O Ferries dismissing 800 employees in March 2022 without any form of consultation, the Government said it would introduce a new statutory code of practice on the use of ‘fire and rehire’ practices to change employee’s terms and conditions of employment. Whilst ‘fire & rehire’ is nothing new, the use of the practice by organisations such as P&O has drawn significant negative attention which the Government is now acting on.
Last week, the Government launched its 12-week consultation on the newly published draft Code of Practice. The code has been designed to ‘ensure employers take all reasonable steps to explore alternatives to dismissal and engage in meaningful consultation… seeking to find an agreed solution before dismissal. The code lays out steps to be followed by an employer should they consider that changes need to be made to terms of employment. If it becomes apparent that employees will not accept the new terms without negotiation, the employer should re-examine its business strategy and plans in light of the potentially serious consequences for employees.
Where an employer decides to move forward with dismissal and re-engagement, it should give as much notice as possible of the dismissal and consider if any employees need a longer notice period as per their existing employment contract. The code states that before making a decision to dismiss, employers should take time to re-analyse their business strategy and plans, taking into account potential negative consequences of making such a decision unilaterally. Fire and rehire should effectively only be used as a last resort.
The employer must have engaged fully in the consultation process to be justifiably led to the conclusion that changes still need to be made to employment contracts. Only at this point, can employers then choose to dismiss and re-engage employees on the new terms offered.
Whilst the code sets no legal obligations on employers, if the matter goes to tribunal and the employer is found to have not followed the correct processes, the tribunal may increase in any award by up to 25%. Similarly, where employees unreasonably fail to comply with the processes, the tribunal can decrease any award offered by up to 25%.
The consultation closes at 11:59pm on 18th April. The draft Code of Practice can be found here.
