Fire & re-hire – new code comes into effect

Scope of the new Code

The statutory Code of Practice on Dismissal and Re-engagement came into force as of 18 July 2024.

The aim of the new Code is to ensure employers behave reasonably when looking to make changes to employees’ terms and conditions. Therefore, employers can now use ‘fire and rehire’ only as a last resort, rather than using the threat of dismissal as a negotiation tactic by placing unfair pressure on the employee where there is no real intention to dismiss. In the first instance, employers will be required to explore alternative options and properly consult employees, before raising the prospect of dismissal.

Employers are reminded that the Code will still apply where redundancy is being considered alongside dismissal and re-engagement of the same employees.

Importantly, employers must contact ACAS prior to raising the possibility of dismissal and re-engagement.

Failure to follow the Code

Whilst breach of the code will not in itself amount to a stand alone claim at an Employment Tribunal, judges will take into account whether it has been followed, in a similar way to the ACAS Code.

Where there has been an unreasonable failure to comply with the Code, any compensation awarded may be increased or decreased by up to 25%.

The Future

Whilst the new Labour Government has facilitated the Code coming into force on the basis it provides some additional protection to employees, it is expected that a further overhaul will take place in the coming months.

Having previously committed to ‘putting an end to these practices’, the Secretary of State has confirmed that once it has brought forward the new Code on ‘fire and rehire’, the Government intends to replace the new Code with the proposed Employment Rights Bill, ending ‘fire and rehire’ practices entirely.

Comment

Employers should always seek advice before considering dismissal and re-engagement as a genuine course of action, particularly given their new obligations under the new Code.