New Statutory Code of Practice on Dismissal and Re-engagement: What you need to know
The Statutory Code of Practice on Dismissal and Re-engagement (‘the Code’) officially came into force on 18th July 2024. This new regulation aims to provide fair guidelines for handling ‘fire and re-hire’ processes. Details of the Code can be found here: Code of practice on dismissal and re-engagement issued by the Secretary of State under section 203 of the Trade Union and Labour Relations (Consolidation) Act 1992 - GOV.UK (www.gov.uk)
Background
Last year, we highlighted that the Department for Business, Energy, and Industrial Strategy (BEIS) had released a draft Code of Practice on how to handle ‘fire and re-hire’ processes fairly when agreements to change contractual terms with staff have been unsuccessful. This move was in response to concerns that some employers were using this practice to apply undue pressure on employees to accept less beneficial terms.
The consultation period on the draft Code concluded on 18th April 2023. The Government has now published the final version of the Code, which incorporates Acas guidance on Making changes to employment contracts - employer responsibilities (Acas advice) and will operate similarly to the requirement to follow the Acas Code of Practice on Disciplinary and Grievance processes.
The statutory Code will apply to employers (a) considering making changes to employees' contracts of employment, and (b) where it is expected that, if the employees do not agree to the proposals, they may require to dismiss those employees and offer to re-employ them on new terms or hire new staff to carry out work under the new terms.
Some of the key points on ‘fire and rehire’ that are set out in the Code are:
- Only use it as a last resort – Employees should not be threatened with dismissal, and offered a new contract, until extensive consultation has been carried out and all options have been considered and exhausted.
- No minimum consultation period – There is no minimum prescribed time period in which employers must consult with staff, but it is advised do so ‘for as long as reasonably possible’. Seek legal advice or contact Acas before you raise the possibility of ‘fire and rehire’ with affected staff.
- Give as much notice of your proposals as reasonably practicable – Consult at an early stage and give staff plenty of time to consider suitable arrangements.
- Be clear about your objectives – Give as much information as possible to employees to help them understand the need for change.
- Explore alternatives – During the consultation consider all other possible options that might achieve the desired outcomes without resorting to dismissal and re-engagement.
- Re-examine proposals – If employees reject the changes, review the proposals with them and consider all feedback from staff.
- Consider committing to future reviews of the changes – Set a review date to assess whether the changes remain necessary.
- Consider introducing multiple changes on a phased basis – You may be more successful in reaching agreement with staff if you do not impose numerous changes all at once.
- Do not threaten dismissal – If dismissal is not something that you expect to consider (even if staff don’t agree to the proposals) don’t threaten it. Don’t try to coerce employees into signing new terms and conditions by threatening termination of their contract if they don’t agree. The prospect of dismissal and re-engagement should only be raised with staff once all other attempts to reach agreement have failed and legal/Acas advice has been sought.
Failure to follow the Code
An employee cannot bring an Employment Tribunal Claim for a failure by their employer to follow the Code alone. However, any failure to follow the Code can be presented as evidence in proceedings before a court or employment tribunal, for example in an Unfair Dismissal Claim.
If the Code applies to a particular claim brought by an employee, then the tribunal can increase any award it makes, by up to 25%, if an employer has unreasonably failed to comply with the Code.
Our view
Christine Jamieson, Senior Paralegal in our Employment team comments:
“The Code reflects current good practice advice but that may change again in the coming months given Labour’s pledge to end ‘fire and re-hire’ practices.
“In the meantime, it is now more important than ever to and read and follow the Code and ensure that a full and fair consultation has been carried out, before termination and re-engagement is even considered.
“If you are thinking about making changes to your staff terms and conditions, or if you find you have reached an impasse in consultations, please contact us for legal advice at an early stage, and before you consider any ‘fire and rehire’ process”.
