Changing Employment Contracts: Fire and Rehire

Fire and Rehire has been in the spotlight recently with high-profile cases like British Gas where staff were dismissed and re-engaged on new terms with longer hours and lower pay.  The TUC has claimed that one in 10 workers have been threatened with fire and rehire during the pandemic and some MPs and unions have called for it to be banned.  There has been concern that the pandemic is being used to reduce workers rights and bypass discussions about change.

Fire and Rehire is the practice of dismissing staff with notice and offering them a new contract with new terms to force through a change in the employment contract when the employer has been unable to agree the changes with the employee.

To change an employment contract, the change should either be allowed for by the employment contract itself or the employee will need to agree to the change.  An example of where a change is allowed for by the contract would be a mobility clause allowing the employer to reasonably change the employee’s place of work.  Unreasonably imposing a substantial change to the contract without agreement will allow the employee to resign and bring claims for constructive unfair dismissal and their notice pay.   Such changes should always be negotiated and agreed with an employee to avoid disputes.

Generally, fire and rehire is a last resort in cases where the employer has been unable to secure employee agreement to a contract change.  In many cases, an employee will agree to a proposed change where it is proposed as an alternative to redundancy during tough economic times.  To successfully defend a claim for unfair dismissal in fire and rehire cases, there will need to be a business reason for the proposed change and the employer will need to show that it has reasonably consulted with the employee, explaining the business grounds, seeking input and trying to reach agreement.  Without a sound business reason and employee consultation, any dismissal will be unfair.

The government asked Acas to investigate the practice in October, and its fact-finding report has been published from a wide range of contributors, including unions, academics, lawyers and business.  They found it was a longstanding practice and there was a view that its use may increase when the furlough scheme is wound down.  Some believed it to always be unacceptable and others that it was reasonable when used as a last resort.  A number of suggestions were made about possible reforms, such as reforming unfair dismissal law, producing non-statutory guidance and using public procurement and access to government funding to disincentivise employers from using the practice.  Whilst some observed that tightening rules may not have the desired effect, employers may become risk-averse to re-employing dismissed staff so that staff are simply made redundant rather than being re-hired.  It remains to be seen if any of the recommendations will be adopted. 

For advice on changing contract terms, contact Laura Claridge on 01689 887873 or email laura.claridge@cwj.co.uk