New code to promote best practice for employers planning to fire and re-hire

As promised last year in the wake of the P&O affair, the Government is consulting on a new ACAS code of practice which will apply when employers seek to change the terms and conditions of their workforce.

Contracts of employment can’t be changed unless both parties agree. But if agreement can’t be reached, some employers may seek to impose changes by dismissing the staff who don’t agree and offering to re-engage them on the new terms and conditions (“fire and re-hire”).

The sudden dismissal of nearly 800 P&O seafarers last year highlighted the vulnerability of workers in this context. Rather than responding to calls to ban the practice altogether, the Government promised to bring in a statutory code of practice to increase the incentives for employers to act within the law. It won’t apply where staff are to be dismissed because of redundancy, but will apply where an employer is seeking to change terms and conditions, and plans to re-engage existing staff or bring in new workers to cover their jobs.

Like the ACAS guidance, which was published last year, the draft Code expects employers to engage with their workforce in good time about any changes they wish to implement, and stresses that fire and re-hire should only be used as a last resort. In addition, it expects employers to provide practical support (for example by phasing changes or extending the notice period) if they decide that such action can’t be avoided.

The new Code will complement but not displace the existing legal framework, which creates a combination of individual and collective rights to protect employees where the employer dismisses and offers re-engagement. However, if an individual employee brings a claim before the tribunal, their compensation can be increased by up to 25% where the employer has not complied with the Code.

There appear to be no plans to apply an uplift where failure to comply with the Code is linked to a breach of collective consultation requirements, which apply if the employer is proposing to dismiss and re-engage 20 or more staff.

More information about the new Code is available on the Mills & Reeve employment blog here.

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