Fire and rehire involves employers dismissing staff and offering to re-employ them on different, usually less advantageous, terms and conditions.
This practice, also known as dismissal and reengagement, is most commonly used when the employer wishes to alter the terms of an employee’s contract (for example, core working hours) but the employee does not agree to the change. Fire and rehire has become especially prevalent during the Covid-19 pandemic, attracting increased publicity and political condemnation.
In June 2021, the industrial relations body Acas published evidence on the use of fire and rehire practices at work, outlining a range of concerns. However, it also confirmed that legislating to ban or curb fire and rehire would not be straightforward and could be counter-productive in some instances.
In response, the government asked Acas to produce guidance to help employers explore all other options first before considering fire and rehire as a last resort. Acas published its resulting advice in November 2021.
Launching the guidance, Acas’s chief executive Susan Clews said: “Our new advice is clear that fire and rehire is an extreme step that can seriously damage working relations and has significant legal risks for organisations.”
The guidance emphasises that fire and rehire should be considered only in the most limited circumstances and after extensive attempts have been made to agree proposed changes with employees.
Even in those circumstances, there are significant risks. These include:
- Costly legal claims, including constructive dismissal and unfair dismissal;
- Reputational damage to an organisation or brand, which could deter customers and new employees;
- Damage to staff morale and productivity;
- Immediate and long-lasting damage to trust and working relations;
- Losing valued people from the organisation – either because they do not accept the offer of a new contract, or they leave afterwards due to the way the situation was handled;
- Likely industrial action if there is a trade union.
The Acas guidance aims to help employers reach agreement with staff over possible changes to their employment contracts. It stresses the importance of maintaining positive employment relations during this process and beyond.
The advice includes fully consulting with affected staff and their representatives in a genuine and meaningful way, sharing relevant information and exploring alternative options to try to reach a compromise if the original proposed changes are not agreed.
It also suggests that employers should be transparent about the business reasons for any proposed changes. This will help employees better understand why changes might be necessary, and should make discussions more effective and constructive.
Employers should also try to be responsive to employees’ suggestions in respect of the proposed changes and avoid adopting an approach whereby they are intent on pushing through their plans irrespective of employees’ views. Making it evident to employees that their views are being listened to and acted upon should help alleviate tension.
An employer might also consider ways in which to make the proposed changes more attractive to employees. For example, an employer might offer extra pay or additional leave to compensate for an unpopular proposal.
Consideration should also be given to whether a change could be introduced gradually rather than all at once, if it could be introduced on a temporary basis, or if there are any other ways of achieving the desired aims.
Ultimately, if the proposed changes cannot be agreed, an employer might give notice that the changes will be imposed, or dismiss and offer to rehire an employee.
Due to the risks outlined above, before taking this step employers should satisfy themselves that significant attempts have been made to try to reach an agreement on the proposed contract changes. It may be necessary to prove to a tribunal that there was genuinely no other option available to the employer but to dismiss and offer to rehire the employee.
Gemma Wilson is a solicitor in the employment practice at Glaisyers ETL