Contractual changes and the use of fire and rehire

This term fire and rehire can be used to refer to a situation where employers dismiss and then re-employ workers on different terms and conditions. Or in some cases it is used as a bargaining tool, suggested to workers during negotiations on changing their terms and conditions.

Some businesses may view fire and rehire as a legitimate way to introduce changes that help reduce costs in the business, increase productivity or avoid redundancies, while other commentators believe the practice is unacceptable and if used inappropriately can unfairly diminish workers terms and conditions. How the practice is used in individual situations will dictate which view is correct.

How Covid-19 impacted fire and rehire

Covid-19 brought with it many business challenges, including furlough, and changing working patterns, and in some cases, it left businesses needing to make permanent changes to existing contracts in order to survive.

During 2020 publicity around fire and rehire practices increased, suggesting the practice was being used during the pandemic to bypass normal workplace dialogue on change. We saw many examples of this ourselves, particularly in pay reductions and changes to bonus and commission schemes.

ACAS research on fire and rehire

In October 2020 the government asked ACAS to conduct some research into the practice, engaging with a variety of stakeholders to explore their views and understanding of the topic. The aim was to gain insight into its prevalence and context on where and how it is being used to ultimately decide whether long term policy changes might be needed.

The research confirmed that fire and rehire is not a new phenomenon, but that it has become more common in recent years, and especially during the pandemic when business challenges have perhaps been more time sensitive than usual.

Examples of when fire and rehire is used in the workplace

The ACAS study found fire and rehire being used in a range of different circumstances including:

Redundancy scenarios

Where it is being used to avoid or minimise redundancies, enabling employers to reduce costs while still retaining the existing knowledge and skillsets of their staff.

Harmonising terms and conditions

To help employers streamline or rationalise differences in staff contracts in respect of pay, hours, shifts, job titles, either in connection with a business transfer or just to support an overall reduction in operational costs.

Introducing flexibility into contracts

Fire and rehire was also being used to facilitate the introduction of new shift systems, changes to working hours and payment entitlements.

Interrupting continuity of service

Another potential motivation for using fire and rehire was to interrupt employee’s length of service. In particular with those staff with less than two years’ service, which is the required timeframe for unfair dismissal claims.

Changing operational needs

Fire and rehire was also deployed in situations where the operational needs of a business have dramatically changed, for example changes in consumer behaviour (due to Covid-19).

What is the existing law on fire and rehire?

Whilst fire and rehire is not an unlawful practice, the circumstances in which it is applied, and the way it is implemented define whether it is deemed to be reasonable or not.

Variation of contract terms should depend on mutual agreement between the employer and employee, either through consultation or via a trade union where terms are covered by a collective agreement.

If an agreement can’t be reached, then this is the most common point at which fire and rehire is used to force a variation in contract terms. Of course, an individual can always refuse the offer of re-employment on the revised terms and then consider whether they have any claims as a result of the employer’s behaviour.

What are the risks involved in fire and rehire?

Employers should always think carefully about using this method as it’s not without risk. Staff contract changes should always be implemented through consent following an open and honest negotiation process, rather than being enforced on employees with no choice.

Fire and rehire should not be used as a tactic to coerce employees into agreeing to unfair terms or as a threat to job security. Employers should consider the following legal obligations and protections before considering making contractual variations without agreement:

– Wrongful/unfair dismissal

– Breach of contract

– Constructive dismissal

– Collective redundancy consultation requirements

– Collective bargaining

– TUPE rules

ACAS advice on fire and rehire

Currently the government are not working on any policy changes around this topic, but as the effects of Covid-19 continue to impact UK businesses, there is no doubt it will stay in the spotlight.

After presenting their research findings to the government ACAS were asked to produce updated guidance on fire and rehire, to help employers explore all other options before considering this method.

This guidance was published in November 2021, and you can read it here.

Need more help?

Our team are experts in contractual changes and can support both businesses and individuals with advice and support in this area, you can contact us for an informal chat here.