New ACAS guidance cracks down on fire and rehire tactics

New ACAS guidance cracks down on fire and rehire tactics

There is new guidance published by ACAS on ‘fire and rehire’ amidst surge in attempts to fire and rehire employees on lesser contractual terms.

Whilst fire and rehire can help avoid redundancies, ACAS identifies the use of the Covid-19 pandemic as a ‘smokescreen’ to diminish workers’ terms and conditions via extreme fire and rehire practices.

What is fire and rehire?

The approach – more commonly referred to as dismissal and re-engagement – is where an employee’s contract of employment is terminated, and at the same time, an offer is made to re-engage them on different terms of employment that are usually more preferable for the employer.

Could an employer be vulnerable to a claim of unfair dismissal if the approach was taken?

Whether a dismissal in these circumstances is fair will depend on the employer’s reasons for taking this approach and whether they entered meaningful consultation with affected employees. Provided their reasons are compelling enough, and a fair process has been followed, an employee who unreasonably refuses an offer of re-engagement may not then succeed in an unfair dismissal claim against the employer.

Why has the guidance been published?

ACAS was asked by the Department for Business, Energy and Industrial Strategy (BEIS) to conduct an evidence gathering exercise to learn more about the use of fire and rehire.

Once completed, Susan Clews (ACAS Chief Executive) said: “Our findings provide valuable insight into the use of fire and rehire practices. We gathered a range of views from professional bodies with workplace expertise, including trade unions and employer organisations.

“Some of the participants told us about the business challenges of COVID-19 and how the use of fire and rehire can help reduce redundancies. Others believe that the practice is unacceptable, and that the pandemic has been used as a ‘smokescreen’ to diminish workers’ terms and conditions.

“There was also evidence that fire and rehire practices have been used for many years and predate the pandemic. We will take up the government’s request to produce further guidance that encourages good workplace practices when negotiating changes to staff contracts.”

What does the ACAS guidance recommend?

To curb the use of more extreme fire and rehire practices and the potential fall-out (which could include damage to working relations, claims of breach of contract or constructive dismissal, decrease in commitment and performance etc.), ACAS urges employers to:

  • Thoroughly explore all other options first and make every effort to reach an agreement with staff regarding the proposed contractual changes.
  • Consider how best to communicate the proposed changes, including communicating with absent employees (e.g. long-term sickness or maternity leave), and the possibility of using alternative methods of communication because of a disability or where English is not spoken by an employee as their first language.
  • Inform affected employees and their representatives about the proposed changes and provide clear information as early as possible.
  • Consult with affected employees and their representatives in a genuine and meaningful way about the proposed changes.
  • Stay constructive, explore alternative options to reach a compromise and stay focused on trying to reach a consensus.

What now for employers considering fire and rehire?

Whilst the new ACAS guidance doesn’t affect an employers’ ability to utilise fire and rehire, to dismiss and re-engage and employee as it remains a fair and legal route for employers with compelling reasons to make contractual changes, it is still a complex area and professional advice should be taken.

The publication of this guidance underlines the increased scrutiny of fire and rehire practices. Given the political and media backlash to more extreme examples of the same, employers should consider following the new ACAS guidance as it could be the difference between consensus and fall out.

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