Back in June Acas produced a report on the “fire and re-hire” practices used by some employers to make detrimental changes to employees’ terms and conditions of employment. In essence, the employee is given notice of dismissal from his old contract but offered immediate reinstatement on a new one which incorporates the changes the employer wanted to make.  The practice has been thrown into particular relief by the Covid pandemic and the consequence adverse impact on some employers’ ability to maintain previous contract terms.

A political hot potato at the best of times, opinion on the practice is starkly polarised – for employers, it grants necessary flexibility and helps avoid or reduce compulsory redundancies, while for those on the other end, it is a means of worsening contractually-negotiated terms, the pandemic is being exploited as a smokescreen for reducing benefits without the financial imperative to do so, the tactic is used or threatened to undermine or bypass genuine workplace dialogue on change, and so on.  Sensing an opportunity to make some electoral capital out of the practice, MPs and ministers across the political spectrum have all leapt into the fray brandishing their own strong opinions and only somewhat belatedly commissioning Acas to find the facts which may justify them.  In the end, however, the resulting report did not add a great deal to those respective perceptions other than confirming that a lot of people feel terribly strongly about fire and re-hire one way or the other and have done so for many years pre-Covid.

However, now we have Acas’s guidance on employers’ responsibilities when making changes to employment contracts.  It is essentially all about consulting with staff about the rationale for the changes, and then when that fails, talking about it some more.  It reminds employers to make sure that they exhaust any agreed collective bargaining procedure before moving on, as direct approaches to unionised staff will end very badly and expensively if you don’t.  Be seen also, it says, to consider the question from all angles to find a basis for agreement – can the change be introduced gradually or temporarily or expressly subject to reversal if things improve?  Make sure that changes visibly impact senior management at least as severely as other workers, the guidance proposes, not as a legal requirement but because it will make the change slightly easier to sell to other staff.  In HR, take care that the legal and reputational flak which your company may cop for making contract changes this way is understood by your board in advance – damage to employment relations, losing valued people, legal claims, damage to the brand, possible industrial action and so on.

In the end, when all else has failed, what does Acas suggest you do when you need to make a contractual change and just can’t get staff agreement to it?  Ultimately, you can either just impose the change anyway (and risk breach of contract, unlawful deductions and/or constructive dismissal claims) or *cough*, fire and re-hire.

Acas says that this should be a last resort only, and so ultimately the thrust of its guidance is not that you can’t do it, but that you should not do it (and ideally not even threaten it) until all other options have failed.  That sounds great in theory, but it overlooks the strong possibility that early on in your contract change negotiations, your employees will ask in terms – what is going to happen to if, having consulted with me up to and beyond the point of reason, you still want to make the change and I still don’t agree?  Is there really an honest answer other than that the employee would ultimately have to leave?  And as soon as you say that, have you not just put a bus through this guidance?

The guidance then reminds employers that however compelling the need for changes to be made, a dismissal is still a dismissal. If you are doing this on a large scale, the collective redundancy provisions will therefore be engaged even if it is not your intention actually to lose anyone and the staff affected are not, in the usual sense, redundant.  Even if the employee is re-hired on a new contract without loss of statutory continuity, he can also still claim to have been unfairly dismissed from the old one (weird but true – “dismissal” is defined as the termination of an employment contract, not of an employment relationship).  And obviously the bigger the financial gap between the old contract and the new one, the greater the value of that claim.  Therefore Acas notes that before you go into bat in a fire and re-hire process you should have (i) a good reason – why is this change necessary, why can’t you achieve that objective by any other means?, etc.; (ii) a fair process – that means open, extended and informed consultation, a genuine dialogue and the impartial application of the changes proposed; and (iii) a channel for appeal against dismissal, even though (having presumably explained and consulted yourself to a standstill prior to giving notice) it is pretty hard to see what this could usefully add.

Employment Law Worldview