Government opens new consultation on Statutory ‘Fire and Rehire’ Code of Practice

Following the controversial actions by P&O Ferries last year in dismissing over 800 workers without consultation, the government announced that it would take action to clamp down on controversial tactics used by employers who fail to engage in meaningful consultation with employees.

A key takeaway from the Code is the intention for any employer or employee who has unreasonably failed to comply with it to be at risk of an employment tribunal increasing (in respect of employers) or decreasing (in respect of employees) an award of compensation by up to 25% in relevant proceedings. The most common type of claim affected will likely be claims for unfair dismissal. Those familiar with the statutory uplift and reduction mechanisms for unreasonable breaches of the ACAS Code on disciplinary and grievance procedures will note the similarity here. A key distinction though is the scope for these new proposed adjustments to be applied on a much larger scale, given that the scope for claims for failure to collectively consult may be brought on behalf of in excess of 100 employees.

In order to comply with the Code, an employer considering the use of fire and rehire tactics would need to take the following steps:

• Provide employees with as much information as reasonably possible about the proposed changes to terms and conditions as early as possible in the process.
• Engage in meaningful consultation with the employees in good faith and take into consideration any alternative proposals.
• If the changes are not agreed, continue to assess whether it really needs to implement the changes and re-examine its business strategy.
• Put any agreed changes in writing, setting out clearly what the amendments are and when they will take effect.
• Treat dismissal and re-engagement as a last resort. The employer should consider if the changes are truly necessary, if there are any alternative options, and if the changes could disproportionately impact a group of employees with a shared protected characteristic.
• If proceeding with dismissal, provide as much notice as possible, consider phased introduction of the proposed changes, and any other practical support (for example, relocation assistance or career coaching).
• Continue to review the requirement for the imposed changes and monitor the impact of the changes over time.

The Code as drafted would apply regardless of the number of employees affected by the employer’s proposals. This means that even if the employer proposed to change terms and conditions for one employee, it must engage in consultation before proposing dismissal as an alternative to the employee accepting the change. This is a key departure from the current collective redundancy consultation requirements which require dismissal to be proposed for at least 20 employees before the obligation to collectively consult is triggered. In addition, the employer’s reasons for seeking the change in terms and conditions will have no bearing on the application of the Code, even if the employer believes that the changes are economically necessary for the success or even the continuation of the business.

The Code is not currently binding and may be subject to further change before it is published. The government has asked interested parties to share their views on the draft Code. The consultation closes on 18^th April 2023 and it is expected that the Code will be brought into force thereafter.

For further information about any of the issues discussed in this update please get in touch with one of our Employment solicitors today.