Using “fire and rehire” as a way to implement changes to terms and conditions of employment has become increasingly controversial in the UK in recent years. In October the government blocked legislation that would have made it unlawful for employers to dismiss employees and re-engage them on worse terms. The government instead asked ACAS to provide further guidance for employers on how to avoid the need to dismiss and re-engage staff on new terms. ACAS has now published that guidance.

What happened

It is relatively common for an employer to want to change employees’ terms and conditions of employment, particularly in response to economic pressures. The position may be relatively straightforward if an employer has a contractual right to make the change, or employees are prepared to agree to it. However, if this is not the case, the only way to make the change may be to dismiss employees on notice and offer them re-engagement on the new terms. Often referred to as “fire and rehire”, the practice has become increasingly controversial.

Although the UK government has not supported efforts by some MPs to ban the practice through legislation, it has indicated that it views using threats of dismissal as a negotiating tactic as “completely unacceptable”. It asked ACAS to produce more detailed guidance for employers on how to avoid the need to dismiss and re-engage staff.

ACAS has now published the guidance. The key points include:

  • Reminding employers of the need to inform and consult with staff or their representatives, and to provide information about the rationale for the changes and the likely impact if changes are not accepted;
  • Explaining why genuine consultation is important and how it may help obtain employee agreement to the proposals, or reach a compromise that both the employer and employees can support;
  • Warning employers not to use threats about what will happen if the proposed change is not agreed, particularly at an early stage of discussions;
  • Suggesting that managers and employee representatives are given training on consultations and negotiations to ensure that discussions are effective;
  • Indicating that employers should continue to explore options and alternatives to the proposed changes “for as long as is reasonably possible”;
  • Reminding employers that dismissing and reengaging employees in order to make the proposed change should be viewed as a last resort; and
  • Offering collective conciliation through ACAS to try to reach an agreement where an employer is negotiating with a union.

The guidance also highlights the fact that, following the recent Supreme Court decision in Kostal UK Ltd v Dunkley, an employer with a recognised trade union will be acting unlawfully if it makes an offer of new terms direct to employees before it has exhausted the agreed collective bargaining procedure.

Next steps 

The ACAS guidance is non-binding and does not change the law. However, it emphasises the importance of engaging in full and constructive dialogue with employees and, where relevant, their representatives before pressing ahead with changes to terms and conditions of employment. Such dialogue may make agreement more likely, avoiding the need to dismiss employees at all. Even if agreement is not forthcoming, the reputational risks associated with “fire and rehire” tactics are also likely to be significantly lower if an employer can genuinely say that it dismissed employees and offered them new terms as a last resort, after it had fully considered any alternatives suggested by the workforce.