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Government cracks down on controversial ‘fire and rehire’ practices

The Government is taking action against ‘fire and rehire’ practices by empowering employment tribunals to increase compensation by up to 25% for non-compliance with the new Code of Practice. The Code mandates fair consultation and alternative solutions before changing employment terms, and prohibits using dismissal threats as pressure. Pending parliamentary approval, the Code will be effective later this summer.

The Government has announced action to tackle the use of controversial ‘fire and rehire’ practices. Employment tribunals will have the power to apply an uplift of up to 25 percent of an employee’s compensation if an employer unreasonably fails to comply with the code.

Dismissal and re-engagement, also known as ‘fire and rehire’, refers to when an employer fires an employee and offers them a new contract on new, often less favourable terms.

In future the courts, and employment tribunals, will take the new Code of Practice Code into account when considering relevant cases. This will include on unfair dismissal claims where the employer should have followed the Code.

The new Code clarifies how employers should behave when seeking to change employees’ terms and conditions, aiming to ensure employees are properly consulted and treated fairly.

Employers will now also need to explore alternatives to dismissal and re-engagement and have meaningful discussions with employees or trade unions to reach an agreed outcome.

The Code makes it clear to employers that they must not use threats of dismissal to pressurise employees into accepting new terms. They should also not raise the prospect of dismissal unreasonably early or threaten dismissal where it is not envisaged.

The Government has laid the Code of Practice in Parliament for approval by both Houses. Subject to that approval, the Code will then be brought into effect later in the summer.

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