Councils issue warning over removal of ‘fire and rehire’ without replacement mechanism for making contractual changes

Removal of the possibility of so-called ‘fire and rehire’, without a replacement mechanism for making contractual changes to terms and conditions, will impact on councils’ ability to implement equality proofed pay structures or deliver local government reorganisation, the Local Government Association has warned.

In a briefing on the Employment Rights Bill, the LGA insisted, however, that the use of ‘fire and rehire’ is rare in councils and is “very much treated as a last resort”.

The LGA said: “In councils, the reason for making such changes will typically be driven by the pressing need to address, for example, equal pay and equality issues though the introduction of a new pay and grading system, or as a consequence of factors outside the control of the employer, such as need to implement changes in the way that vital public services need to be delivered or local government reorganisation.

“Changes may also be needed sometimes to ensure financial budgets can be met. Underpinning this will be the need to deliver value for money to the taxpayer.”

The briefing noted that councils typically recognise trade unions for collective bargaining purposes and so terms and conditions in councils will normally be collectively agreed with unions.

“Therefore, where changes are required, councils will always seek to make them through agreement with recognised trade unions. Extensive efforts will be made to do that, involving often lengthy consultations processes with unions and employees, in some cases with Acas involvement,” it said.

“If agreement to the changes cannot be obtained through agreement with the union/s, then councils might consider whether agreement could be obtained directly with individuals. However, that carries risks, particularly in terms of s.145B of the Trade Union and Labour Relations (Consolidation) Act 1992, which makes it unlawful for employers to bypass the union by offering new terms and conditions directly to employees who are union members.”

The LGA said that councils would therefore approach the option of fire and rehire “with great care and will make great efforts to avoid using it”.

The briefing said: “Nevertheless, in limited circumstances, it may be the only option left if one or more trade unions refuse to reach agreement to changes. Removal of the possibility of fire and rehire, without a replacement mechanism for making contractual changes, could discourage trade unions from engaging in meaningful negotiation around proposed changes leading to the retention of working practices.

“It could also stymie agreements reached with some trade unions, who may represent the majority of employees, because of the action of another union that may refuse to reach an agreement.”

The LGA expressed concern that the limits which would be placed on the use of fire and rehire through new clause 22 of the Bill would in effect make the use of it in councils almost impossible.

“This is because the circumstances in which the exception to the right to claim automatic unfair dismissal applies in cases of fire and rehire are very limited. It appears to apply only where businesses are dealing with severe financial difficulties, and they need to make changes to employment contracts to allow them to cut costs to keep the business afloat.”

Such circumstances are very unlikely to apply in the case of councils, the LGA argued, as it would be rare for local authorities to be able to demonstrate that the financial pressures were such to fall into the category covered by the exemption.

For a council to do so, it is likely that it would need to have issued a section 114 notice. “The issue of such a notice carries serious consequences and, therefore, they will only be issued where absolutely necessary.”

The briefing called for an amendment that would insert a new provision providing that the automatic unfair dismissal protections will not apply where the reason for the variation of the contract was to ensure compliance with equality law duties, effect local government reorganisation or to ensure value for money in the delivery of public services.

The Bill is at the report stage in the House of Commons.