Adam Wheal | 26th November 2021

Fire and Rehire : Changing the Terms of Employment

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Adam Wheal | 26th November 2021

Fire and Rehire : Changing the Terms of Employment


The practice of “fire and rehire” has been a longstanding method available to employers to alter terms and conditions of employee contracts. However, the COVID-19 pandemic has caused the controversial practice to receive attention, as employers have sometimes used it as a means to alter employee terms due to the adverse business consequences caused by the pandemic.

This blog will explore the means by which employers can change the terms and conditions of employees’ contracts, and the recent scrutiny surrounding fire and rehire.

Changing terms and conditions of employment

Throughout the course of their employment, an employee’s terms of employment will likely change. Where changes to the contract are beneficial to the employee, such as pay increases or changes to job roles due to promotions, these will normally occur by mutual consent and are unlikely to cause issues for the employer.

However, the employer may wish to make changes to the employment contract that the employee is less likely to accept.

The pandemic caused a mass shift to home and hybrid working, which, combined with business and economic uncertainty, left many employers in the position of needing to alter contractual terms in some way.

In order to implement changes, there are 3 main options open to employers:

  1. Obtain the express agreement from employees to the new terms; or
  2. Introduce the changes regardless of whether the employees have agreed, leaving it to the employees to decide how to respond; or
  3. Dismiss the employees under the existing employment contracts and offer re-engagement on the new terms.

Options 2 and 3 above carry risks for the employer, who will need to ensure they follow appropriate processes and procedures so as not to risk claims such as wrongful or unfair dismissal.

The CIPD reported that whilst a majority of changes to employees’ contractual terms and conditions were achieved through express agreement during the pandemic, fire and rehire was an area in which progress could be made as it can create a high risk of legal claims and detrimentally affect employer reputation.

During the pandemic the method of fire and rehire received high profile criticism, as seen with the proposals by British Airways to fire a significant amount of their staff and re-employ on less favourable contracts.

Acas report on fire and rehire

Acas investigated the use of fire and rehire by employers, with participants in the report comprising various stakeholders including employer bodies, trade unions and academics. The report, called “Dismissal and re-engagement (fire-and-rehire): a fact-finding exercise” was published on 8 June 2021.

The report discussed the challenges caused by the pandemic and the increased scrutiny on the use of fire and rehire by employers. Concerns were raised that some employers were using the pandemic “as a pretext to diminish worker’s terms and conditions and using fire and rehire as a tactic to undermine or bypass genuine workplace dialogue on change.” This criticism has been seen recently with the high profile reports that British Airways “threatened” to fire significant numbers of staff and re-employ on less favourable contracts.

The participants of the Acas report highlighted that fire and rehire could be used in a wide range of circumstances, both before and during the pandemic, such as: redundancy scenarios (with a view to reduce redundancies); to introduce flexibility in terms of working hours, shift patterns and pay entitlements; or even to break continuity of service.

Whilst some participants believed the practice of fire and rehire to be a suitable method for changing terms, others deemed it unreasonable and expressed concern about the imbalance of power that it brings to discussions when used as a negotiation tactic.

Government response

On 8 June 2021, in a House of Commons debate Mr Paul Scully MP set out the Government’s response to the report, stating that it is an “unacceptable and, frankly, immoral” negotiation tactic.
The Government advised that employers should engage in thorough consultation with employees and exhaust other alternatives before engaging in fire and rehire.

However, the Government was also cautious to avoid unintended consequences which may result if they introduced legislation to combat the use of fire and rehire, such as increased redundancies which could only increase the hardship faced by many employees during the pandemic.

Instead of proceeding with such legislation therefore, the Government asked Acas to provide further, more comprehensive guidance.

Fire and rehire bill blocked by Government

Unsurprisingly therefore, the Government recently blocked a Private Member’s Bill on 22 October 2021 which aimed to limit the use of fire and rehire in the form of the Employment and Trade Union Rights (Dismissal and Re-engagement) Bill. Not only would the Bill discourage the use of the method but it would provide additional protection to those affected by it. It seemed that the Government intended to await the further Acas guidance before deciding on how to proceed.

New Acas Guidance

On 11 November 2021, Acas published their reviewed guidance.

Acas Chief Executive, Susan Clews, states that “fire and rehire is an extreme step that can seriously damage working relations and has significant legal risks for organisations”. Employers are therefore encouraged to obtain agreement with staff before making changes where this is possible.

The guidance highlights that effective consultation with staff can  help maintain strong working relations and bolster staff morale, as employees will better understand the reasoning behind the changes. By providing them with an opportunity to discuss their thoughts on the proposals, they can also feel that they have been given an opportunity to inform business decisions.

Comment

Whilst the Government previously refused to legislate, Paul Scully highlighted that future legislation is not out of the question. It will now be interesting to see whether the new Acas advice and statements from the Chief Executive prompt the Government to introduce legislation in this area.

However, given the Government’s comments and recent Acas report, along with the risk of potential claims, employers should exercise careful consideration if using this method to change employee terms. As Acas highlights, fire and rehire is often seen as an extreme step and so thorough consultation with employees as to the proposed changes will be the most secure way of reducing the risk that employees will bring future claims.

If you would like to discuss the contents of this blog in further detail, or are considering altering employee terms and conditions and would like some assistance, then please contact a member of the Employment team.