Fire and re-hire? The debate goes on…

Tesco - the introduction of fire and rehire

You may remember the dispute over the practice of fire and rehire which reached the Court of Appeal in the case of the union, USDAW and Tesco. Tesco had sought to adopt this practice to remove a contractual entitlement to a pay allowance, so it issued notice of termination to many employees and offered re-engagement on terms which did not include the pay allowance. USDAW issued proceedings challenging the legality of the process. The High Court granted an injunction preventing Tesco from dismissing the affected employees, holding that there was an implied term based on the mutual intention of the parties that the pay allowance would be permanent. The Court of Appeal overturned this decision and reaffirmed the established position that Tesco was entitled to give notice of termination and offer immediate re-engagement on new terms. As a result of this case, the process of higher and re-fire and rehire, a tactic which has become more prevalent because of the pandemic, came into the public eye.

The union applied for permission to appeal to the Supreme Court against the decision of the Court of Appeal and this permission has now been granted. The Supreme Court will now test the proposition that remedy for wrongful or unfair dismissal is almost invariably financial and an injunction in the circumstances is not an appropriate remedy.

The fire and re-hire statutory code of practice

Separately, as a result of the publicity engendered by this and other cases, the Government has produced a statutory Code of Practice on Fire and Re-hire, on which it has launched consultation. The Code sets out detailed steps that employers should take when seeking to make changes to contractual terms, including providing information, engaging in meaningful consultation and exploring alternatives, and makes clear that employers should not use threats of dismissal as a negotiating tactic. The Code will be issued under S.203 of the Trade Union and Labour Relations (Consolidation) Act 1992, meaning that employment tribunals will be required to take it into account where relevant in any proceedings, and may adjust compensation by up to 25% to reflect unreasonable non-compliance. The consultation closes on 18 April 2023. The finalised Code will be brought into force when Parliamentary time allows.

So, the debate about whether fire and rehire tactics are lawful and, if they are, how they should be deployed, rumbles on. There is some sympathy for employers who are doing their best in constrained economic circumstances, to keep their business going where they consult on changing terms and conditions to keep staff employed, and employees flatly refuse to agree. It is understandable that the employer might think that either they should agree to the change in terms which will enable them to retain their jobs, or risk losing them if they don’t. Employers may have no choice but to make cutbacks via headcount if employees refuse to agree changes which would enable them to at least remain employed.

Our recommendation on the use of fire and rehire

As things currently stand, since we have yet to have the benefit of the Supreme Court decision, the Code of Practice should enable employers to continue to use this strategy lawfully, provided they abide by the recommendations in the Code – though when this will come into force as of course another matter. Until it does, our recommendation is to consult as fully and thoroughly as possible, and only use this strategy as a last resort.