What do British Gas, Weetabix and Clarkes Shoes have in common? The answer is that they all have recently undertaken “fire and rehire” exercises in relation to long serving staff. Although rebranded by unions and the media in the last year, fire and rehire has been in existence for decades. Previously referred to as “termination and re-engagement”, it is a process under which employers serve notice of termination of the existing contract of employment and simultaneously offer a new contract of employment to take effect as soon as the old contract has expired. The employee is faced with a choice; accept the new terms to continue working for the employer, or leave. Many British Gas engineers chose the latter, leading to a mass return of their distinctive blue vans on their last day of employment.
Many British Gas employees did not accept less favourable terms offered by the company, and returned their vans.
Employees with at least two years’ employment can claim unfair dismissal if they choose not to accept the new contract, but there are disincentives in so doing. Employers using the approach for genuine business reasons have a long established defence to unfair dismissal cases arising out of fire and rehire. Employment Tribunals ground to a halt during the pandemic and have a huge backlog of cases to work through, with hearing dates up to 2 years away. And with over a million vacancies, employees generally will be able to find alternative employment reasonably quickly, so their claim will be limited; compensation in a successful claim is calculated by reference to loss of earnings between dismissal and finding a new job.
Employers say that a fire and rehire exercise is undertaken to modernise contracts and outdated employment practices. Critics would argue that modernisation is a euphemism for pay cuts. The pandemic required many employers to take a radical look at their business operating models, but there have been concerns that some employers used the pandemic as a pretext to diminish workers’ terms and conditions. A further concern is that unscrupulous employers have been using fire-and-rehire as a tactic to undermine or bypass genuine workplace dialogue on change.
In response to these concerns, in October 2020 the Department for Business asked the conciliation service ACAS to carry out a fact-finding exercise into fire and rehire. In a lengthy report, ACAS examined a number of options to curb the practice, including reforming the law on unfair dismissal to make the employer’s defence more difficult, and introducing mandatory consultation steps before a fire and rehire exercise can be undertaken. But for now, the practice looks set to continue, with figures from the TUC suggesting that since March 2020 up to 9% of workers have been required to reapply for their jobs on worse terms and conditions.
It remains to be seen if the Government is sufficiently concerned about pressure from workers’ groups and the bad press being generated by fire and rehire to consider implementation of some of the ACAS recommendations.
If you would like further information on any of the topics detailed in this blog please email advice@sherrardslaw.com or call the office on 01273 834120 to talk to a member of our team.
