Acas launches guidance to dissuade fire and rehire misuse

Acas has produced further guidance around negotiating changes to staff contracts in response to concerns about ‘fire and rehire’ practices.

The service was commissioned by the Department for Business, Enterprise and Industrial Strategy to conduct a fact-finding exercise following reports of an increase in employers dismissing staff and re-engaging them on less favourable contracts during the pandemic.

Although Acas found that “fire and rehire” is not a new phenomenon, despite claims it has been used extensively over past year, there is a general concern about a further uptick in dismissals and re-engagement when furlough and Covid-related business support initiatives are wound down.

Acas chief executive Susan Clews said: “Some of the participants told us about the business challenges of Covid-19 and how the use of fire and rehire can help reduce redundancies. Others believe that the practice is unacceptable, and that the pandemic has been used as a ‘smokescreen’ to diminish workers’ terms and conditions.

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“There was also evidence that fire and rehire practices have been used for many years and predate the pandemic. We will take up the government’s request to produce further guidance that encourages good workplace practices when negotiating changes to staff contracts.”

Earier this year, the TUC claimed that one in 10 workers have been told to re-apply for their jobs on worse terms and conditions. Dozens of MPs and unions have called for the practice to be outlawed in a letter to the Prime Minister.

Acas’s fact-finding exercise sought views from employer bodies, trade unions, academics, and professional bodies and networks with advisory contact with employers, such as HR and employment lawyers.

Some organisations said that fire and rehire could be regarded as reasonable when used as a last resort – for example, when a solution could not be negotiated and the alternative option was business insolvency.

However, others suggested that fire and rehire is rarely, if ever, justifiable and any use of the practice should be prohibited.

Some participants expressed the view that the current protections against misuse of fire and rehire cannot be enforced, particularly with the employment tribunal system facing a backlog of cases.

Although many suggested legislative reform was needed to stamp out misuse of the practice, others felt non-legislative options would help discourage its use and promote good employee relations. Options for this included non-statutory guidance that reflected case law and greater encouragement of collective bargaining and constructive workplace dialogue.

“Greater restrictions on fire and rehire might result in some employers becoming risk-averse to re-employing dismissed staff in the event that their business takes an upturn (for example, by securing a new business contract) shortly after letting those workers go,” the Acas report said.

“Some participants felt this could have a negative effect, not only on employers’ capacity to recruit skilled workers, but also potentially on the employees themselves. As one commented, ‘it’s worth remembering that restrictions on fire-and-rehire might lead to fire-and-don’t-rehire, rather than retain-and-don’t-fire’.”

Options for legislative reform proposed to Acas included:

Reforming the law on unfair dismissal
Strengthening employment tribunals’ requirement to scrutinise the business reasons given by employers in fire and rehire dismissals
Reforming collective consultation obligations to extend them to workers as well as employees
Strengthening employers’ obligations around adherence to procedures under collective agreements
Prohibiting the use of wide contractual variation clauses.

Non-legislative reforms proposed included:

Producing non-statutory guidance for employers
Producing a public messaging statement or campaign
Using public procurement and access to government funding to disincentivise fire and rehire
Naming and shaming organisations that use fire and rehire.