Fire and rehire is often described as a controversial technique where an employer dismisses an employee and then rehires them, in most cases, on less favourable terms.
The practice of fire and rehire is not unlawful in the UK, provided it is handled correctly. However, employees can bring a claim for unfair dismissal if they are eligible.
The recent P&O Ferries case, with the company facing widespread criticism and the prospect of legal action after 800 staff members were sacked via video call, announcing plans to replace them with agency workers has placed the practice of fire and rehire back in the headlines, with the Government considering whether to ban it.
These are difficult times for businesses, especially after the economic disruption caused by lockdown measures, with one in ten workers being told to reapply for their jobs on worse terms since the first lockdown, according to research by TUC.
However, the mass firing by P&O Ferries does, on face value, appear to be illegal and it is certainly not the right way to go about things from an ethical standpoint. When an employer lays off more than 100 staff at once, they must consult unions and workers. They are also required to notify the Secretary of State in writing in advance.
As a result, it is very likely that the company could be facing many unfair dismissal claims, and the company’s directors could face criminal prosecutions for failing to follow redundancy consultation rules.
So, what are the legal and ethical implications of fire and rehire?
Guidance for employers acts as a reminder of employee rights in relation to varying contract terms and advises employers to explore all other options to change employment contract terms before resorting to fire and rehire.
For example, when employers consider changing terms of a contract, they should look at whether:
- The contract contains a flexibility clause
- If the employee affected by the change agrees to it after a period of consultation
- If a trade union or other employment representatives agree to the change on the employee’s behalf
And, under fire and rehire, such extended consultations should make clear that the result of non-compliance that any employees who do not agree will have their employment terminated, and they will be offered a new contract on revised terms.
Although fire and rehire is not unlawful here yet as previously mentioned, there are various statutory protections afforded to employees that employers must consider.
The main legal protections include:
- Protection against wrongful dismissal- this occurs when an employer dismisses an employee in breach of contract. This can happen when an employer has not given the employee sufficient notice as set out in their contract, like what has happened with P&O Ferries.
- Protection against unfair dismissal- this applies to employees who have worked for their employer for two or more years. A dismissal is deemed unfair unless it is for a potentially fair reason listed in the legislation and the employer’s decision to dismiss the employee was reasonable in the circumstances.
- Breach of contract- where a less favourable change is imposed on employees without dismissing them, it will amount to a breach of contract unless the employee has agreed to the change and given implied consent.
It is important that employers are aware that they don’t have an automatic right to fire and rehire employers, and it should be used only as a last resort when all other options have failed to result in an agreement to change.
Before looking to adopt a fire and rehire approach, the employer would need to show there are good business reasons behind it.
Employers should always first consider other solutions, such as negotiating a reduction of terms and being open and honest will all employees about any problems that are facing the business.
For now, we wait to see what the Government will do and if the practice will be made illegal here in the UK.