Fire and rehire – a pandemic necessity or unlawful act?

Fire and rehire is the practice of employers giving notice to end an employee’s contract of employment and offering them a new contract under different terms and conditions of employment.  This can be done lawfully where an employer has a good business reason for making the change and the employer has gone through a fair procedure, including carrying out comprehensive consultation.  Where employees have agreed to the changes, which during the pandemic has mainly been in order to avoid a redundancy situation, fire and rehire is not necessary.

Many employers have changed their employees’ terms and conditions during the pandemic, whether to enable it to take advantage of the furlough scheme or to enable the survival of the business through these difficult economic times.  There have been some high-profile fire and rehire cases recently, such as the British Gas case, where employees were given notice to end their existing contracts and asked to agree to new terms for lower pay and longer hours. Hundreds of employees refused and so their employment terminated. In the recent case of Khatun v Winn Solicitors, the dismissal of a solicitor for refusing to accept new terms during furlough was held to be unfair.  MPs have debated the issue recently and the government has said it will look at the issue ‘when parliamentary time allows’.  ACAS has also published a report on dismissal and reengagement which can be found here.  The executive summary to the report states the following:

‘Suggested legislative options included: tightening up the law around unfair dismissal; enhancing the requirement and capacity for employment tribunals to scrutinise business’ rationale for change in relevant cases; protecting continuity of employment in fire-and-rehire-scenarios; and strengthening employers’ consultation obligations around proposed dismissals.’

‘Suggested non-legislative options included: improved guidance for employers on relevant legal obligations and good practice; using data on fire-and-rehire to inform decisions around public procurement and access to government funding; and publishing ‘name and shame’ data on employers’ use of fire-and-rehire practices on a government website.’

In summary, employers can ‘fire and rehire’ lawfully and fairly where they have a good business rationale for doing so and they carry out a fair procedure.  The ability for employers to do this where necessary can save jobs, enabling employers to continue to employ employees where they wouldn’t otherwise be able to do so.  However, employers should take care not to use the current extreme circumstances to propose changes to terms and conditions that go above and beyond those that are strictly necessary to avoid redundancies/ensure business continuity and any changes to terms and conditions that are temporary, such as those made in order to enable employers to access the furlough scheme, should revert back to previous terms and conditions of employment as soon as it is appropriate to do so.

If you have a need to make changes to the terms and conditions of employees and you want to reduce the risk of unfair dismissal and breach of contract claims, contact Elizabeth Judson at elizabeth.judson@dtmlegal.com.