Fire and rehire”- is it legal and what are the alternatives for employers?

In times of restructuring and commercial changes, employers may consider ‘fire and rehire’ to cut overhead costs and amend employment terms. Whilst this process is legal in the UK, this method of changing employees’ terms and conditions is often seen as controversial as employees who refuse to agree to proposed new terms are then ‘fired and rehired’ on far less favourable grounds, for little to no consideration.

by Nicole Subrovska, Trainee Solicitor

What are the risks?

Employers who choose to go down this route are at risk of unfair dismissal claims being brought against them for the actual dismissal. Also, this method of pressuring employees by introducing the risk of losing their job is seen as a forceful and intimidating method of amending employees’ contracts to suit the needs of the business and that can affect staff morale too.

ACAS guidance

Firing and rehiring is deemed to be a last resort method by ACAS (the Advisory Conciliation and Arbitration Service), who advised in the November 2021 guidance that it was to be used if and only when all other options have failed.

As with any dismissal, the ACAS guidance clearly states that before dismissal, the employer needs to have made all attempts to consult with the employee(s) as to the changes to their contract and what that would mean for them. If the employer is looking to fire and rehire 20 or more employees, then the guidance goes further and there must be a collective consultation of 90 days or less. Should the correct procedure not be followed, this will feed a claim for unfair dismissal.

Additionally, in March 2022, the UK government announced a new statutory code, which aims to “clamp down on controversial tactics used by unscrupulous employers.” Employers will therefore not be free to ‘fire and rehire’ on their own terms.

What are the alternatives?

Given the risks and issues related to ‘fire and rehire’, it is easy to see that there should be better alternatives available for employers and employees.

Settlement agreement (formerly known as compromise agreements), have been around for years, and are proving to be a more risk averse and kinder way of dealing with redundancies, amongst other work-related disputes. You can find further information on Settlement https://anthonygold.co.uk/services/ dispute-resolution-for-individuals/ employment/settlement-agreements

Agreements and the advantages to both employer and employee in resolving disputes amicably here.

Other changes could include:

- Voluntary redundancies;

- Temporary furlough;

- Halting recruitment;

- Encouraging work from home to cut overheads;

- Agreements between employer and employees for contractual changes.

All would serve the purpose of effectively reducing costs, without destroying morale, and losing talent. If it is not avoidable, employers must be alive to the fact that it will be necessary for them to put forward their reasons and ensure a just consultation procedure is followed before executing the fire and rehire.