Labour party calls for ‘fire and rehire’ tactics to be outlawed

Experts say both employers and employees must be flexible in contract negotiations, but argue firms need this ‘last resort’ option

The leader of the Labour party has called for controversial ‘fire and rehire’ tactics to be outlawed, calling the practice a “truly shocking” way to treat employees who have worked through the coronavirus crisis.

Speaking virtually at the GMB Union conference, Starmer said the use of fire and rehire tactics had surged during the pandemic and risked a “levelling down” of the economy and of workers’ rights. “We have to outlaw fire and rehire,” he said.

Acknowledging that fire and rehire had been used before the pandemic, Starmer said it was now “much more widespread [...] and across a range of sectors. Including those previously thought to provide more secure employment.”

“That’s a truly shocking way to repay the sacrifices of so many working people. This ‘levelling down’ of our economy and workers’ rights can’t continue,” he said.

Fire and rehire is a practice used in contract renegotiations where the employer terminates the employee’s contract and immediately re-engages them on new and often less favourable terms.

Separately, a fact-finding report from Acas, released earlier this week, said fire and rehire practices had become more commonplace during the pandemic as companies have been forced to radically rethink their business models.

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The report warned that a number of participants in the study said some employers had been using the crisis caused by the virus opportunistically as a “smokescreen” to diminish workers’ terms and conditions, and that fire and rehire was also being used to undermine or bypass genuine workplace dialogue on change.

The report said there was also evidence that during the pandemic some employers were revisiting fire and rehire in the context of long-standing negotiations – although the report added that it was unclear whether this was opportunistic or being driven by a genuine need to change business models.

Ben Willmott, head of public policy for the CIPD, said the practice should be used only as “an absolute last resort” and that employers “must consider [...] all alternatives”.

He added that reforming the law around hire and rehire “is complex and would need to avoid negative unintended consequences”.

“The creation of non-statutory guidance on the law and good practice in relation to dismissal and re-engagement and strengthening employment tribunals’ requirement to scrutinise the business reasons advanced by employers in fire and rehire dismissals could together help reduce poor or exploitative practice in this area,” Willmott said.

Responding to Starmer’s speech, Andrew Crudge, associate at Trethowans, said that while the practice might be “overused by some employers”, a complete ban could end up being more harmful to employees.

“The likely alternative would be a redundancy exercise, a recruitment freeze or an uncompetitive business forced into a steady decline – or all three,” Crudge said. “None of these outcomes would benefit the workforce.”

Crudge said there needed to be flexibility on both sides of any contract renegotiation, and that the majority of employees would accept a change in terms without the need to resort to fire and rehire.

“In a competitive and developing marketplace, employers need to be able to adjust their working practices,” he said. “In most cases, when confronted with this reality, employees will accept the need for changes to be made to their terms. But in some cases, staff won’t agree.

“In those circumstances, it’s important that employers have the option, as a last resort, to push through the changes by ‘firing and rehiring’ on the new terms.”