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Should Employers Be Able to 'Fire and Re-Hire' Employees?

on Tuesday, 06 July 2021.

The practice of 'fire and re-hire' (also known as dismissal and re-engagement) is a practice used by employers to bring about changes to the terms and conditions of employees' contracts of employment.

It is generally used as a last resort where the proposed change cannot be agreed with the employee.

As the name suggests, the 'fire and re-hire' process involves the employer giving notice and dismissing an employee, and subsequently offering to re-hire the employee on new varied terms. Although the practice itself is lawful, because it involves a dismissal there is invariably a higher degree of risk involved.

Unions have previously advocated to outlaw this practice and following its increased use by employers to vary terms of employment in response to the coronavirus (COVID-19) pandemic, the practice has been gaining increased media attention and receiving more scrutiny.

ACAS Report on 'Fire and Re-Hire'

Following increased scrutiny around the topic, ACAS was asked by the Government to gather evidence and report on the use of the 'fire and re-hire' practice by employers. The report takes into account the opinions of various stakeholders including employer bodies, trade unions, professional bodies and networks with advisory contact with employers, covering employment lawyers, accountants, HR and payroll services, academics, and ACAS senior advisers. The report was submitted to government ministers in February 2021 and the findings have now been published.

Findings of the ACAS Report on 'Fire and Re-Hire'

The report noted a divergence in views amongst participants as to whether or not employers were using the pandemic opportunistically as a justification to force through changes to employment terms or, rather, whether the increase in the use of 'fire and re-hire' seen over the past year was simply a fallout of genuine business pressures caused by the pandemic.

The report found that views were equally mixed as to whether the practice should be reformed, and if so, how. Findings ranged from feelings that 'fire and re-hire' practices are never reasonable, and should be outlawed by legislation to, on the other side, those who believed that it could be useful when genuinely used as a last resort. There were also concerns that reforms, or a blanket ban, could lead to less flexibility for employers, which could instead lead to failing businesses and redundancies.

What Is the Outcome?

The Government has confirmed that it does not intend to legislate to outlaw 'fire and re-hire' practices at present. In his response to the report in the House of Commons, MP Paul Scully (Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy) confirmed that the expectation is that an employer should exhaust every avenue towards reaching agreement where it is necessary to change terms and conditions. However, due to the risk that reform in this area could result in more businesses failing if they cannot amend terms of employment due to business necessity, the Government would not be outlawing this practice. The Government has instead asked ACAS to provide more detailed guidance on how and when termination and re-engagement should be used, and 'good practice' for employers. We therefore await this further guidance.

The Government have committed to continuing to work with ACAS on the issue, and Paul Scully also confirmed that "nothing is off the table."

How Does This Affect Schools?

Whilst the further ACAS guidance is still awaited, we would strongly encourage schools to be cautious when firing and re-hiring and only adopt this approach when necessary and if all other attempts to agree varied terms have been exhausted. Schools should also be mindful of the increased scrutiny of the practice. When moving to terminate and re-engage, schools should ensure they have followed a fair dismissal procedure - including:

  • ensuring there are sound business reasons for the change
  • engaging with affected employees
  • considering alternatives prior to deciding to dismiss
  • offering a right of appeal.

Schools should also be aware that this practice may also trigger collective consultation obligations where it is possible that more than 20 employees may be dismissed.

For specialist legal advice on the implications of 'fire and re-hire' in your school, please contact Alice Reeve in our Employment Law team on 0117 314 5383 or complete the form below.

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