Changes to the code of practice on fire and re-hire

Following last year’s consultation, the Government has published an updated draft statutory code of practice on ‘fire and re-hire’. Michael Halsey looks at the key changes.

The updated draft statutory code of practice on dismissal and re-engagement is now subject to parliamentary approval and is likely to come into force by summer 2024.

What is the purpose of the draft code?

The government published the original draft Code of Practice in response to P&O Ferries' actions in dismissing hundreds of staff overnight in 2022. A draft Code on dismissal and re-engagement (otherwise known as 'fire and re-hire') was published for consultation last year. The Code is not intended to change the law in this area, but sets out a step-by-step process for employers to follow in order to explore alternatives to dismissal when seeking to change terms and conditions of employment.

At the time it was published, commentators such as ACAS said the aims of the draft Code were welcomed, but that some of the detail of the Code itself should be refined.

Consultation response and updated code

The Government has now responded to last year's consultation and has published an updated draft Code. The updated draft:

• Clarifies that it does not apply where the employer is purely considering redundancies, but does apply where both redundancy and dismissal and re-engagement is envisaged in respect of the same employees
• Is clear that the Code applies irrespective of whether or not collective bargaining applies
• Changes its advice to employers whose staff are unwilling to accept proposed contractual changes. The original draft Code stated that employers in this position should re-examine their business strategy. This requirement has been changed so that employers must re-examine their plans but not necessarily re-visit their business case, and should take employee feedback into account if they do not do so
• Does not require employers to re-assess their analysis before making a final decision to dismiss staff
• Strengthens advice around contacting ACAS. It states that employers should contact ACAS before raising the prospect of dismissal and re-engagement with staff. This does not change the general position that ACAS can be contacted whenever the Code applies
• No longer states that employers and employee representatives should continue to discuss ways to potentially reach agreement on new terms after dismissal and re-engagement has taken place

Consequences of failing to comply with the Code

Once the Code is in force, it will be admissible as evidence in relevant Tribunals or court proceedings. In the event of a successful claim concerning a matter to which the Code applies, the Tribunal will have the power to uplift or decrease compensation by up to 25% for an unreasonable failure on the part of either the employer or employee to follow the Code.

Next steps

No confirmed timescale has been announced for the bringing into force of the Code. However, we now expect the updated draft to go through parliamentary approval and note the government's expectation that it will be in force by summer 2024.

Michael Halsey is a Partner in VWV’s Employment team.