Government consults on statutory code to crack down on “fire and rehire” practices

The Government has unveiled a “crackdown” on controversial dismissal and re-engagement tactics through a planned statutory code of practice.

A consultation will run for the next 12 weeks to invite views from the public and other interested groups on a new statutory code of practice for dismissal and re-engagement, also known as “fire and rehire”.

‘Fire and rehire’ refers to when an employer fires an employee and offers them a new contract on new, often less-favourable terms.

The planned statutory code, subject to a consultation, will make it “explicitly clear to employers that they must not use threats of dismissal to pressurise employees into accepting new terms”, and that they should have “honest and open-minded discussions with their employees and representatives”, the Government said.

The Code is issued under section 203(1)(a) of the Trade Union and Labour Relations (Consolidation) Act 1992.

The new statutory code of practice will set out employers’ responsibilities when seeking to change contractual terms and conditions of employment, including that businesses must consult with employees in a “fair and transparent way” when proposing changes to their employment terms.

Once in force, Courts and Employment Tribunals will be able to take the code into account when considering relevant cases, including unfair dismissal.

The Courts will be given power to apply a 25% uplift to an employee’s compensation in certain circumstances if an employer is found to have not complied with the statutory code.

Business Secretary Grant Shapps said: “Using fire and rehire as a negotiation tactic is a quick-fire way to damage your reputation as a business. Our new code will crack down on firms mistreating employees and set out how they should behave when changing an employee’s contract.

“We are determined to do all we can to protect and enhance workers’ rights across the country.”

In March 2022, ferry operator P&O fired 786 workers and then rehired cheaper agency workers. The Government notes that the company did this “without due consultation” and without informing the Business Secretary at the time, “failing to follow best practice”.

It was following this event that Grant Shapps, as Transport Secretary at the time, introduced a 9-point plan including primary legislation to tackle these issues.

Individuals or groups with an interest can take part in the consultation: Draft Code of Practice on dismissal and re-engagement. The consultation closes on 18 April 2023.

Lottie Winson