Wake-up call: Can I ‘fire and rehire’ my employees?

The controversial practice is not illegal, but employers should take heed when seeking to change an employee’s contract. Tina Chander explains.

The problem

‘Fire and rehire’ is an employment tactic used by business owners when they want to implement alterations to contracts of employment when their staff oppose the changes. In short, employers will dismiss employees (with contractual notice), and then offer re-employment on revised terms.

The law

Although banned in Ireland, Spain, and France, ‘fire and rehire’ is not an uncommon practice in the UK. Statistics show since the start of the pandemic, approximately one in 10 UK workers have had to reapply for their role on inferior terms or risk being permanently terminated. Though controversial, it isn’t illegal.

 

Statistics show since the start of the pandemic, approximately one in 10 UK workers have had to reapply for their role on inferior terms

Employees with less than two years’ service are the most likely to be impacted because of their limited employment rights, but this doesn’t mean the rest of the workforce isn’t susceptible.

In January 2020, the government launched an investigation into the process with the Advisory, Conciliation and Arbitration Service (ACAS), however on 8 June 2021, it concluded that while the use of fire and rehire as a negotiation tool should be condemned, it would not introduce legislation to ban the practice. As a result, it remains an option for employers dealing with a problematic issue.

Expert advice

When employers want to modify an employee’s terms of employment, there is no straightforward resolution, especially when the proposed changes are deemed to be detrimental to the employee. It’s likely that all other alternatives will have risks for employers and will be resisted by employees (and their unions).

Situations when employers might opt to use the scheme include:

• Where the employer is concerned there isn’t a genuine risk of redundancy;
• Where employers want to reduce the number of redundancies, or are wanting to save on costs, while retaining the knowledge and experience within their workforce;
• When negotiations regarding an employees’ terms and conditions break down;
• When employers are looking to standardise the terms and conditions of employees; or
• If employers are hoping to introduce flexibility into contracts.

To-do checklist

• Employers should only proceed with ‘fire and rehire’ as a solution once all alternatives have been considered, they have assessed both the risks of legal action and impact on the remaining team, and ultimately it has been decided that the changes are unavoidable.
• If a business does decide to embark on a ‘fire and rehire’ process, ACAS recommends that a fair dismissal procedure is observed.
• All employees need to be given sufficient notice (statutory or contractual, whichever is longer) and be offered the right to appeal.
• Employers should check whether flexibility clauses have been written into the contracts in question. These may offer employers the opportunity to make reasonable changes, but caution should be applied, as many unilateral amendments cannot be enforced irrespective of this clause.
• A period of meaningful consultation between the employer and the employee may help both parties mutually agree revised terms.

Beware!

Ending an employee’s contract and implementing a new one on diminished pay or benefits could leave employers open to employment tribunal. Terminated employees, if they have the mandatory length of continual service, could bring claims for unfair dismissal/constructive unfair dismissal. Employees could also potentially sue for breach of contract or unlawful deduction of wages claims in the civil courts and employment tribunal respectively.

If employers fail to provide the relevant statutory/contractual notice period during the process, they could also face claims of wrongful dismissal.

Tina Chander is head of employment law at regional law firm Wright Hassall