UK: consultation on draft 'fire and re-hire' code

Update 19 February 2024: the Government published its revised draft for Parliamentary approval - see here for further details.

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Update 4 May 2023: Acas has published its response to the consultation here outlining various concerns about the draft Code, including that it does not adequately set out appropriate standards of reasonableness, is overlong, and is unclear about expectations and consequences.  

The Government has finally published for consultation until 18 April 2023 its proposed statutory code to encourage employers that want to change workforce terms and conditions to do so by negotiation and agreement, and only to dismiss then 're-hire' the existing (or new) workers on new terms as a last resort.

The Draft Code of Practice on dismissal and re-engagement will not apply to statutory redundancies (where the employer's need for employees to do a particular type of work or at a particular place has reduced), but in other situations involving a possible fire and re-hire, it will require employers to do more by way of information and consultation.  Currently there is only an obligation to inform and consult representatives where at least 20 dismissals are proposed at a single establishment within a 90 day period.  In contrast, there is no minimum number of affected employees required for the draft Code to apply, so it will impose collective information and consultation obligations for the first time in smaller-scale exercises.  Where the existing collective redundancy consultation rules already apply, the draft Code obligations will mean starting the process earlier than is currently required and increase the importance of keeping thorough notes of the thought processes and discussions involved. There will be no direct claim for breach of the Code, but tribunals will be required to take the Code into account where relevant and the compensation for certain tribunal claims, including unfair dismissal (but not protective awards for breach of the existing collective redundancy consultation rules), can be adjusted by up to 25% for breach (although this would seemingly apply before the statutory cap on compensatory awards for unfair dismissal).

The key points include:

• Once it is clear that employees are not simply going to accept the proposed changes to their terms, an employer should re-examine its business strategy and plans before going further, taking into account any employee feedback, its objectives, the industrial relations and other risks of imposing changes, and whether there are any alternative ways of achieving the objectives.  It should continue to review these factors at regular intervals throughout the process to include any new information or feedback received.
• The information and consultation required should be with any recognised trade union representatives or existing body of employee representatives representing the affected employees.  If there are other affected employees not so represented, the employer should consult either with each employee individually or consider providing for the selection of representatives with whom to consult.
• The employer should share as much information about the proposals as is reasonably possible, as early as possible, in order to enable the employees or their representatives to understand why the proposed changes are needed and to be able to ask questions and make counter-proposals. This could include the business reasons and rationale for the changes, the anticipated timing and reason for this, the benefits of the changes and the impact if changes are not made.
• Consultation should be in good faith, meaningful and with a view to reaching agreement and avoiding the need for dismissals. The employer should consider any counter-proposals made and engage in a genuine exploration of whether they are workable and could meet the employer's objectives. The employer should be honest and transparent about the fact that it is prepared, if negotiations fail and agreement cannot be reached, to attempt to unilaterally impose changes or to dismiss employees in order to force changes through, but should never use a threat of dismissal only as a negotiating tactic when it is not contemplating this.  The draft Code notes that a longer consultation period is likely to allow for more in-depth discussions and increase the chance of agreement, and suggests that a lengthy period is unlikely to be detrimental notwithstanding that it can be unsettling for the workforce.
• The draft Code discusses the legal risks in an employer choosing to impose new terms unilaterally or in dismissing and re-hiring on new terms. It states that, where agreement cannot be reached, an employer should again review its analysis as to whether this step is truly necessary and should only take that step as a last resort. The employer should give as much notice as possible of the dismissal or new terms and consider whether particular employees may need longer, for example to make changes to childcare arrangements (and, if so, give longer notice where possible). If more than one change is being implemented, the employer should consider phasing them over a longer period. It should also consider providing practical support to its employees and agreeing to review the changes at a fixed point in the future to see if old terms could be reinstated. The employer should not seek to break continuity of service by having a break between dismissal and re-engagement.

The Government is seeking views on whether all steps in the draft Code are necessary and whether it strikes an appropriate right balance between protecting employees and retaining flexibility for businesses, as well as any other comments. The final version will be brought into force "when Parliamentary time allows".