The practice of so-called firing and rehiring has attracted much negative attention in recent years, leading to a promise by the government in early 2022 to create a new statutory Code of Practice for employers to follow when considering the dismissal and reengagement of employees. Today, the government has published a consultation paper on this new Code of Practice. The consultation closes on 18 April 2023.
This consultation paper follows a fact-finding exercise carried out by ACAS in 2021 and the subsequent publication of ACAS guidance for employers seeking to make changes to employees’ contracts of employment.
The key issues covered in the consultation paper are summarised below.
What is the purpose of a new Code of Practice?
The Code is intended to promote good industrial relations by encouraging a genuine and open process when proposing a change to terms and conditions. It seeks to deter employers from using threats of dismissal during negotiations to put pressure on employees to accept new terms. It is not intended to cover every type of dispute or disagreement between employers and employees.
The Code does not apply where an employee is dismissed because there is a genuine redundancy, as defined in the Employment Rights Act 1996.
When will employers need to take account of the Code of Practice?
The government proposes that the Code will apply 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.
What does the Code of Practice require employers to do?
In broad terms the requirements of the Code are that employers consider the following steps before dismissing and re-engaging:
- Communicate the proposed changes to the employees and/or their representatives;
- Comply with information and consultation obligations outside the Code;
- If it is clear that employees are not prepared to accept the contractual changes proposed, re-examine the business strategy;
- Provide employees and/or their representatives with any further information which might help reach consensus;
- Consult meaningfully with employees and/or their representatives in good faith and with a view to managing conflict effectively and resolving any dispute as openly and collaboratively as possible;
- Put any agreed changes in writing;
- Consider whether unilateral changes are to be imposed, putting any new terms in writing explaining the nature and impact of the changes and being mindful of the potential legal risks;
- Consider whether dismissal and re-engagement is necessary;
- Comply with any redundancy obligations, set out the new terms in writing and re-engage employees as quickly as possible;
- Continue to review the need for the imposed changes.
What sanctions apply if an employer fails to follow the Code of Practice?
The Code itself does not impose any legal obligations, and a failure to observe it does not, by itself, render anyone liable to proceedings. However, the Code is admissible in evidence in proceedings before a court or employment tribunal, and any provision of the Code which is relevant to those proceedings must be taken into account by the court or tribunal.
Employment tribunals will have the power to increase an employee’s compensation by up to 25% if an employer unreasonably fails to comply with the Code. They can also decrease any award by up to 25%, where it is the employee who has unreasonably failed to comply.
When will the Code of Practice come into force?
The government has not set a timeframe for bringing the Code of Practice into force, stating simply that it will be ‘when parliamentary time allows’.