Acas Guidance published on Fire and Rehire

Fire and rehire, which is where an employer dismisses its employees and offers continued employment on new terms, is sometimes used by employers as a last resort where employees refuse to expressly agree to a change to their terms and conditions of employment (which is usually less favourable). This practice, which is technically not unlawful, although considered to be a controversial practice, has received considerable media coverage in recent years and several large brands have hit the headlines for dismissing large numbers of employees in order to try and impose tougher terms of employment.

In its fact-finding exercise back in June 2021, which involved engaging with various organisations (including trade unions, lawyers, accountants and HR and payroll providers), Acas found that fire and rehire (which was previously more commonly known as dismissal and re-engagement) was not a new phenomenon, but that there was a shared sense that the practice had become more prevalent in recent years, and that the practice may increase following the end of Government initiatives, such as furlough. 

It was reported that fire and rehire was used in a range of circumstances, including where employers wanted to harmonise terms and conditions after a TUPE transfer and introduce flexibility into contracts, e.g. in relation to working hours. It was acknowledged that businesses have faced significant challenges in the pandemic, and that in some cases fire and rehire may be reasonable where this is used as a last resort and based on a genuine business need. However, many felt that some employers were using the pandemic as a “smoke-screen” to implement less favourable changes to their workforces’ terms and conditions and that they were bypassing carrying out genuine consultations with the workforce on the proposed changes.

Following this report, the Government confirmed that it does not have immediate plans to legislate on this issue. A private members bill, which proposed to amend the law in order to provide safeguards for workers against dismissal and re-engagement on inferior terms and conditions, was defeated by 251 votes to 188 in Parliament. Following this, the Government asked Acas to produce clear and comprehensive guidance on how and when the practice of fire and rehire should be used by employers.

Acas published its guidance note on 11 November 2021, which can be accessed by clicking here. The guidance note covers the various stages to changing an employee’s terms and conditions, from what to consider before making a change, including legal risks, to consulting on proposed changes, and what options are available to employers if employees do not expressly agree to the change. The note highlights the importance of maintaining good relations with employees, and outlines the risks of the practice of fire and rehire, including damage to employee relations, industrial action, and an increase in the risk of employment tribunal claims from employees, including unfair dismissal and discrimination.

The law relating to fire and rehire has not changed. However, the practice now appears to be under more intense scrutiny following its seemingly increased use. Employers should always take legal advice before seeking to change employees’ terms and conditions in light of the risks, and ensure that they exhaust all available options before considering whether to adopt a fire and rehire scheme, which should only ever be used as a last resort.