Fire and re-hire: increased protective awards
The Government has revived a draft order on increased protective awards for failures to follow the statutory Code of Practice. Georgia Blesson looks at what this means for employers.
From 20 January 2025, tribunals will have the power to adjust protective awards by up to 25% where the statutory Code of Practice on dismissal and re-engagement has not been followed.
What is a protective award?
A protective award is a type of compensation that employment tribunals can grant to employees who were not properly consulted in cases of collective redundancies. Under section 188 of TULRCA 1992, employers must engage in meaningful consultation with employees or their representatives when planning large-scale dismissals. If an employer fails to meet these consultation requirements, affected employees or their representatives can file claims for protective awards. The maximum value of a protective award is 90 days' uncapped pay per employee.
New order will introduce ability to increase protective awards
The draft Trade Union and Labour Relations (Consolidation) Act 1992 (Amendment of Schedule A2) Order 2024 (Order), first introduced under the previous government, was initially expected to accompany the statutory Code of Practice on dismissal and re-engagement (statutory Code) when it came into force in July 2024. However, the Order failed to gain House of Lords approval before the general election, leaving its future uncertain.
The Labour Government has now revived the Order, which will now come into effect in January 2025. In addition to this, the government has set out an ambitious legislative agenda, proposing what is essentially an outright ban on fire and re-hire practices altogether. Whilst the Employment Rights Bill is undergoing parliamentary scrutiny, the Order will act as an immediate tool to incentivise employers to follow the statutory Code, pending an all-but outright ban on fire and re-hire.
Key changes and tribunal powers
Tribunals already have the power to increase or decrease compensation by up to 25% in the event of either party's unreasonable failure to follow the statutory Code.
The Order will grant tribunals a new power in addition to this, to consider whether employers have followed the statutory Code in collective consultation cases where protective awards are sought. Should a tribunal find that an employer or employee unreasonably failed to comply with the Code in these circumstances, it will also be able to increase or decrease protective awards by up to 25%.
The potential adjustment of compensation provides tribunals with a powerful lever to encourage employers to follow the statutory Code and engage transparently in any dismissal and re-engagement process.
Implications for employers
Labour’s reinstatement of this Order intensifies the obligations on employers, adding financial risks for those who attempt to bypass the advice set out in the statutory Code. Employers pursuing dismissal and re-engagement strategies should be prepared for heightened scrutiny and the possibility of a significant increase in compensation awards if they unreasonably fail to follow the statutory Code.
Moving towards an outright ban on fire-and-rehire
Labour’s revival of this draft Order is more than a standalone reform; it is a deliberate step within a wider campaign to eradicate fire-and-rehire practices from the employment landscape. By reissuing the Order, Labour is reinforcing its commitment to opposing dismissal and re-engagement practices.
Georgia Blesson is a trainee solicitor at VWV.
