According to some, the practice of fire and rehire has become more widespread during the coronavirus pandemic. Research by the TUC, states since the first lockdown in March 2020 one in 10 workers have been told to reapply for their current job but on worse terms.
The government is under increasing pressure to curb the ability of businesses to “fire and rehire”. The practice is facing considerable opposition from trade unions and others, Frances O’Grady, general secretary of the TUC, said it has “no place in modern Britain and must be outlawed”. And Ben Willmott, head of public policy at the CIPD, said forcing a change to an employment contract by dismissing someone and rehiring on different terms should be “an absolute last resort”.
The practice hit the headlines recently when Centrica’s British Gas decided to accelerate their restructuring plans during the pandemic, culminating in the dismissal of hundreds of engineers after they refused to agree to, what the engineers and their trade union called, cuts to pay and terms of employment.
What is fire and rehire?
“Fire and rehire” refers is the practice of terminating an employee’s contract of employment and rehiring them on a new set terms and conditions, which often include less favourable terms such as longer hours, reduced overtime premiums, shorter breaks, less generous leave or reduced pension benefits.
Is fire and rehire legal?
The procedure used in “fire and rehire” is the issue of a section 188 notice. Section 188 notices are commonly used for mass redundancies. However, they are also used when a company has tried to agree a change in terms and conditions for its employees, but they are refusing to accept it.
Employers can and do change terms of employment. They can do this either where there is a clause in the contract that allows them to do so. The terms of such clauses often limit the scope of changes that can be made and outline the process that needs to be followed. Employers can also seek the employee’s agreement to their proposed changes. However, they cannot unilaterally change contractual terms. If an employee refuses changed terms, such as lower pay, the only option to achiever this and to impose the new terms is to give the employee notice and terminate the employee’s contract and reengage on the new terms. Where an employer dismisses and re-engages an employee on new terms, they must do so, fairly, legally and with appropriate notice.
There is no automatic right to fire and rehire, there needs to be a good business reason to do so. Unlike redundancy it doesn’t have to be the result of of a reduced requirement for work. However, the employer does need to be able to show a pressing business need to justify the dismissals. The practice of dismissing and reengaging on less favourable terms is considered a very serious step by Tribunals; and as such, the grounds for terminating the contract would need be very strong for a Tribunal to be satisfied that dismissal and reengagement was a reasonable decision for an employer to make.
If I need to change employment terms what should I do?
There is no question that this is a tough time for business. The lockdown measures have been commercially damaging for many businesses and that will have left some with no choice other than to try and renegotiate their employment contracts. When changing substantive terms becomes a necessity, how it is managed is critical. The process, of course, has to be lawful, but in addition to legal compliance, the process should be managed in a way that doesn’t damage the reputation of the business or the relationships with its employees. Below I outline 3 steps to follow when seeking to change employee terms to minimise reputational damage and to maintain employee engagement:
• Consult: Listen to the employees’ concerns. Explain what you want to achieve in positive terms e.g. to avoid compulsory redundancies. Identify shared interests and seek to identify mutually beneficial outcomes.
• Educate: Outline the reasons behind your proposal. Identify the stakeholders, and how they are likely to be effected. Explain the consequences of doing nothing.
• Communicate: Tell the affected employees what you are proposing to do, why you are proposing to do it and when you propose to do it.
If you are considering changing employee terms and conditions, get in touch we can help.
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