Changing terms and conditions: A new statutory Code of Practice on Dismissal and Re-engagement

In our experience, most employers regard it as very much a last resort to dismiss and rehire employees as a means of driving through changes to terms and conditions.

Unsurprisingly, there was widespread public criticism of some recent high profile examples of dismissal and re-engagement (also known as ‘fire and rehire’). As a result, the government initially asked the Advisory, Conciliation and Arbitration Service (Acas) to conduct an evidence-gathering exercise on [firing and rehiring] and then to produce new guidance  for employers, which was published in 2021.

Following P&O Ferries' dismissal of around 800 employees without consultation in March 2022, the Government has gone a step further and is consulting on a Draft Code of Practice on Dismissal and Re-engagement. The period of consultation provides an opportunity for all interested individuals and groups to provide their views.

The draft Code states that its purpose is 'to ensure that an employer takes all reasonable steps to explore alternatives to dismissal and engages in meaningful consultation with trade unions, other employee representatives or the individual employees in good faith, with an open mind, and does not use threats of dismissal to put undue pressure on employees to accept new terms, instead of seeking to find an agreed solution.' 

It aims to provide 'practical guidance to employers and employees in situations where an employer:

• considers that it wants to make changes to its employees’ contracts of employment; and

• envisages that, if the employees do not agree to those changes, it might dismiss them

and either offer them re-employment on those new terms or engage new employees or workers to perform the relevant roles on the new terms.'

It might be said that this is no more than a statement of what is already considered to be best practice. But there is one important potential change here: if implemented, the Code will be issued under the Trade Union and Labour Relations (Consolidation) Act 1992, meaning that, although there is no specific legal obligation for employers to follow it, employment tribunals will be required to take it into account where relevant in any proceedings, and may adjust compensation by up to 25% to reflect unreasonable non-compliance.

The Code will apply regardless of the numbers of employees affected, or the employer's business objectives, but it will not apply to redundancy dismissals.

The 12-week consultation is running until 18 April 2023. Employers who wish to respond to the consultation should do so within that period. 

If you need any guidance or have any questions on the issues raised, please do reach out to a member of our team who would be happy to help.