Navigating the New Fire and Rehire code of practice: What Employers Need to Know

As of 18^th July 2024 the new code of practice on "fire and rehire" practices have come into force, marking a significant shift in how employers can manage changes to employment contracts. Issued under section 203 of the Trade Union and Labour Relations (Consolidation) Act 1992, this code of practice aims to foster better industrial relations and provide clear guidelines for employers considering changes to their employees' terms and conditions.

Understanding Fire and Rehire

The term "fire and rehire" refers to the practice where employers dismiss employees and then offer to rehire them on different terms and conditions. While this approach can sometimes be necessary for the economic viability of a business, it has been known to create significant legal, reputational, and relational risks. The new code of practice  are designed to address these issues and promote a more collaborative approach to contractual changes.

Key Elements of the New code of practice

1. Early and Transparent Information Sharing

The code of practice  emphasize the importance of early and transparent communication. Employers must provide detailed information about proposed changes, including the business reasons, who will be affected, and any alternative options considered. This information should be shared as early as reasonably possible to allow for meaningful consultation.

2. Meaningful Consultation Process

Engaging in a genuine and open consultation process is crucial. Employers are required to consult with employees or their representatives (such as trade unions) to explore alternatives and seek agreement on proposed changes. The consultation should be ongoing and in good faith, with a view to reaching a mutually acceptable outcome.

3. Avoiding Premature Threats of Dismissal

Employers should avoid raising the prospect of dismissal unreasonably early in the process. Using the threat of dismissal as a negotiating tactic is discouraged, as it can undermine trust and hinder the chances of reaching an agreed solution. Employers are advised to seek professional advice from before considering dismissal and re-engagement.

4. Re-examining Proposals

If employees do not agree to the proposed changes, employers must re-examine their proposals, considering any feedback received. This involves evaluating the potential negative consequences, such as damage to employee relations, legal risks, and the impact on different groups of employees, especially those with protected characteristics under the Equality Act 2010.

5. Fair Dismissal and Re-engagement Procedures

If dismissal and re-engagement become necessary, employers must ensure the process is fair. This includes having a valid reason for dismissal, following a fair procedure, and providing adequate notice. Employers should also consider additional support for employees, such as career coaching or relocation assistance, to help them adapt to the changes.

Implications for Employers

The new code of practice  require employers to take a more structured and collaborative approach to changing employment contracts. Here are some key implications:

Increased Legal Scrutiny

Failure to follow the new guidelines can impact tribunal decisions, potentially resulting in increased compensation awards. Employers must ensure they comply with all legal obligations to mitigate these risks.

Enhanced Employee Relations

By engaging in meaningful consultation and exploring alternatives to dismissal, employers can build trust and improve relations with their workforce. This collaborative approach can lead to better outcomes for both parties and reduce the likelihood of industrial action.

Clear Communication and Documentation

Employers must provide clear, written communication about proposed changes and document all consultations and agreements. This transparency helps prevent misunderstandings and provides a record that can be referred to in case of disputes.

Ongoing Review and Feedback

After implementing changes, employers should invite feedback and consider further adjustments based on employee input. This continuous improvement approach ensures that changes are effective and minimizes negative impacts on employees.

Conclusion

The new fire and rehire code of practice represent a significant step towards improving industrial relations and providing clear guidelines for managing changes to employment contracts. By following this code of practice, employers can navigate the complexities of contractual changes more effectively, reduce legal risks, and foster a more positive working environment.