Government finalises fire and re-hire code

On the assumption that it will be approved by Parliament in its current form, it is likely to come into force over the summer.

Currently employment legislation doesn’t prohibit using dismissal combined with an offer of re-engagement (‘fire and re-hire’) as a way of imposing changes to terms and conditions of employment where employees are unwilling to agree to them.

However, this remains a risky approach under current law and if not handled correctly can lead to claims for unfair dismissal, breach of contract or discrimination. Where 20 or more employees are potentially affected, it may also involve a breach of the law on collective consultation.

The new Code falls short of banning fire and re-hire. Instead, it leads employers through the steps they should take to consult with their workforce to seek agreement on the changes proposed, with the threat of dismissal being held back as a last resort.

Most of what the Code says is already implicit in current employment law, particularly where the collective consultation requirements are triggered. However, what the Code does for the first time is to provide a free-standing guide to the way employers are expected to behave in this context. As with other statutory codes of practice, employers can’t be sued just because they don’t comply.

But it will be used by employment tribunals to help them interpret the broader requirements of employment law, which don’t address the fire and re-hire scenario directly.

In addition, where employers haven’t followed the Code, the compensation they have to pay can be increased by up to 25 per cent.

As such the publication of the Code represents a compromise between those who don’t see a need for further regulation in this area, and organisations (including the TUC and the Labour Party) who wish to see this practice banned. Of course all this could change if we have a change of Government after the next general election.

• For more about the Code visit the Mills & Reeve website.