The government is launching a new statutory code of practice to deter ‘fire and rehire’ practices, but unions have said the code ‘lacks bite’ and will not discourage ‘bad employers’ like P&O Ferries.
Employment tribunals will have the power to apply an uplift of up to 25% of an employee’s compensation if an employer “unreasonably fails” to comply with the code.
The Department for Business and Trade, which has now published its response to last year’s consultation, says the code protects workers’ rights whilst respecting business flexibility.
Dismissal and re-engagement, also known as “fire and rehire”, refers to when employers dismiss employees and offer them new contracts on less favourable terms.
The government has said it firmly opposes fire and rehire being used as a negotiating tactic and has today published a new draft statutory code of practice making clear how employers must behave in this area.
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Business minister Kevin Hollinrake said: “Our new code will crack down on employers mistreating employees and sets out how they should behave when changing an employee’s contract.
“This announcement shows we are taking action to tackle fire and re-hire practices by balancing protections for workers with business flexibility”.
Courts and employment tribunals will take the fire and rehire code into account where relevant, including in unfair dismissal claims where the employer should have followed the code.
The code clarifies how employers should behave when seeking to change employees’ terms and conditions, aiming to ensure employees are properly consulted and treated fairly.
Employers will need to explore alternatives to dismissal and re-engagement and have meaningful discussions with employees or trade unions to reach an agreed outcome.
The code makes it clear to employers that they must not use threats of dismissal to pressure employees into accepting new terms. They should also not raise the prospect of dismissal unreasonably early or threaten dismissal where it is not envisaged.
Acas chief executive Susan Clews said: “Fire and rehire is an extreme step that can seriously damage working relations and has significant legal risks for organisations. Employers should focus on maintaining good employment relations to reach agreement with staff if they are thinking about making changes to their contracts.”
Ben Willmott, head of public policy at the CIPD, said: “The code promotes good practice, making clear employers should always seek to agree any changes to terms and conditions with employees and that ‘fire and rehire’ should only be used as an absolute last resort.
“It highlights the importance of early and meaningful consultation with employees to maximise the chances of finding alternative solutions which can lead to agreement over proposed changes.
“It also emphasises that Acas has a key role to play and should be contacted by an employer for advice before it raises the prospect of fire and rehire with the workforce.”
However, Paul Nowak, general secretary of the TUC, said: “This code lacks bite and is not going to deter bad employers like P&O from treating staff like disposable labour. We need far more robust legislation to protect people at work.
“One in 10 were threatened with fire and rehire during the pandemic – tinkering around the edges is not going to cut it.”
Unite general secretary Sharon Graham said: “Fire and rehire is an abhorrent practice used by the worst of the worst to attack their own workers. It should obviously be against the law, with serious penalties attached.
“The idea that a code of conduct is going to stop employers like P&O from doing this is just a bad joke.”
The government originally published the draft code more than a year ago, running a 12-week consultation. It has now laid the fire and rehire code of practice in Parliament for approval by both houses. Subject to that approval, the code will then be brought into effect in summer 2024.
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