During the pandemic, many employers have had to change the terms and conditions of their employees’ contracts to enable the business to keep trading during such challenging economic times.
In some cases, employees have agreed to the changes. However, there have been a number of instances where the employees don’t agree to this.
In recent months, a growing number of high-profile businesses have faced criticism for using fire and rehire tactics. Almost 500 British Gas engineers recently lost their jobs after they refused to sign new contracts which would mean they would be working more hours for less pay.
What is firing & re-hiring?
Typically, an employer is only entitled to vary the terms of an employment contract if the employee agrees to the variation. However, if an employer is unable to vary the terms of the employee’s contract by agreement, one option is for it to dismiss the employee and offer to rehire them on new terms.
An employer’s reason for changing terms is often financial e.g. to reduce salaries to save costs. The purpose can also be non-financial e.g. to impose restrictive covenants or to change working hours.
Why is the practice of firing and re-hiring controversial?
The new terms are usually less favourable than the current terms of employment.
If the employee refuses to agree to the new terms, they risk unemployment. This can create a significant power imbalance between employers and employees during the consultation process. Employees can often feel pressured into accepting less favourable terms.
What does the ACAS report say?
ACAS were specifically asked to look into whether the practice was new, its prevalence, the context in which its used and whether the government should intervene.
ACAS found that whilst the practice of fire and rehire has been used by businesses for many years, the pandemic may have caused its use to have increased.
In response to the report, the government has indicated that they will not be introducing legislation to ban the practice of fire and rehire however, they have asked ACAS to produce guidance to help employers explore alternative options.
What options are open to employers?
Whilst the practice of firing and rehiring has not been made unlawful, employers should be very cautious of taking this approach because it could leave them vulnerable to employment tribunal claims. In particular, there is a risk that the employee may bring a claim for unfair dismissal if they are dismissed or if they feel forced to resign rather than accept the new terms. The employee may also be able to claim for wrongful dismissal if the employer fails to give the proper amount of notice of dismissal. There are also potential claims if the employer is dismissing 20 or more employees and they fail in their obligation to carry out collective consultation with any recognised trade union or employee representatives.
In addition, it can put significant strain on employee relations and lead to reputational damage for the business given the controversy surrounding its use.
Notwithstanding this, employers may feel that it is sometimes necessary to take steps to change the terms of employment for business reasons. This is likely to be more common when the furlough scheme finishes at the end of September 2021 and if no further funding is forthcoming for businesses.
Before dismissing and rehiring employees, an employer should always:
- Consider whether there are any other ways to making savings e.g. voluntary redundancies, recruitment freezes.
- Communicate and consult with employees to try and reach an agreement before taking to dismiss and offer re-engagement.
- Ensure there is a justifiable business reason for making changes to the terms of the employment contract.
- Consider any cost-free benefits which can be offered to the employees such as flexible/home working.
- Follow a fair procedure in relation to the dismissal.
- Ensure that they comply with their legal obligations regarding notice.
- Always seek advice before taking any action.
Fire and rehire should always be the last resort. The pandemic has shown that employees faced with the threat of redundancy are often willing to accept less favourable terms, in order to protect their long-term employment. Communication with employees is fundamental.
If your business is in the position where the end of furlough is causing you sleepless nights, get in touch with us to see how we can help you.