Statutory Code of Practice on Dismissal and Re-engagement

The Government has commenced a consultation on its long-awaited statutory Code of Practice on Dismissal and Re-engagement (the Code). The draft Code sets out detailed steps employers should take when seeking to make changes to any contractual terms and conditions, including providing information, engaging in meaningful consultation with employee representatives or trade unions, and exploring alternatives to dismissal. It confirms that employers should not use threats of dismissal as a negotiating tactic.

Employment tribunals would be required to take the Code into account in any legal proceedings, and may provide an uplift of compensation up to 25% to reflect unreasonable non-compliance, which is similar to the ACAS Code of Practice on disciplinary and grievance procedures in unfair dismissal claims. However, the fire and rehire code itself imposes no legal obligations on employers and the government makes it clear that a failure to observe it does not, by itself, make an employer liable to legal proceedings. The consultation closes in April 2023.

The draft Code sets out the steps that an employer should take when it wants to make changes to employees’ contracts of employment (if, for example, it is in financial distress) and believes that if employees do not agree to those changes, it may dismiss them and either offer them re-employment on new contractual terms or engage new employees/workers to perform the relevant roles on the new terms. The Code states that once it is clear to the employer that employees will not accept the new terms without negotiation, it should re-consider its business strategy and plans. The employer should also factor in the negative effects of acting unilaterally, such as reputational risk and damage to industrial relations, and whether there are alternative ways of achieving the same aims.

If the employer decides to change the terms and conditions, the Code states that they should share as much information regarding the proposals as is reasonably possible and engage in meaningful and ‘good faith’ consultation. The employer should fully consider any alternative proposals made by employees and be prepared to engage in a genuine exploration of whether they are achievable or will meet their objectives.

It is important that the employer is honest and transparent about the fact that it is prepared, if negotiations do not succeed, to unilaterally impose changes or to dismiss employees. However, a threat of dismissal should never be used only as a negotiating tactic in circumstances where the employer is not, in fact, contemplating dismissal as a means of achieving its objectives. Employers should not consider unilaterally imposing contractual changes unless they are satisfied that all reasonable alternatives which could result in agreement have been fully explored first.

In relation to dismissal and re-engagement (known as fire and rehire), the Code states that an employer who has participated in a thorough and open information and consultation process, has listened carefully and explored fully any alternative proposals, and has concluded that it still needs to make changes to employment contracts, may consider this as a final resort. In these circumstances, it should give as much notice as possible of the dismissal and consider whether any particular employees might need longer notice periods to make arrangements which might better enable them to accommodate the changes – for example, where the changes affect childcare, journeys to work or other similar issues.

Employers should keep an eye on further developments in April…

For further information or to speak to a member of our Employment team, please call 01689 887812.