Fire-and-rehire Legalities – The Need-to-Knows

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*Information last updated 11/08/22

ACAS, the non-departmental public body whose purpose is to improve organisations and working life, released new guidance to crack down on fire-and-rehire practice at the end of 2021.

An area of employment law often confused by employers and employees alike, the fire-and-rehire procedure is a complex matter that requires demystifying. Read on to discover the legalities and must-knows of fire-and-rehire today.

What is fire-and-rehire?

Formally known as dismissal and reengagement, fire-and-rehire is the process of terminating an employee’s contract to renegotiate the terms and conditions of said contract, to then re-employ, often on diminished terms.

According to ACAS, fire-and-rehire may be used in many different workplace scenarios. For example, this may be to minimise the number of redundancies, rectify terms and conditions of employment, introduce flexibility to contracts, break the continuity of service, or even negotiate around organisational changes in response to industry or consumer needs.

Whilst fire-and-rehire is a long-standing common practice in many sectors, with a particular increase in popularity in light of COVID-19, it must be understood and executed correctly.

Is fire-and-rehire legal?

There is much confusion surrounding this practice, with many considering this to be a necessary course of action where there is reasonable justification, whilst others believe this process to be used as a smokescreen with a potential gateway to employee inequality.

COVID-19 saw an increase in the fire-and-rehire practice when many employers needed to rethink company models to stay afloat. However, many are concerned that the pandemic has been and continues to be used as an excuse to continually use fire-and-rehire as a means to put workers’ rights in jeopardy.

According to ACAS, nearly 1 in 10 workers had been told to re-apply for their jobs on worse terms and conditions since the first lockdown in March 2020. Parliament has also raised concerns, with officials at the Department for Business, Energy and Industrial Strategy inviting ACAS to investigate this issue.

Whilst there are many concerns over this practice, it is, however, legal. There is a legal framework in which employers must operate for this to be a lawful dismissal, and as of 29th March 2022, a new statutory code was introduced to further prevent unethical fire-and-rehire practices alongside ACAS’ guidance.

Consequences of unfair fire-and-rehire

With the process of fire-and-rehire under review by ACAS, it’s important to first understand the limitations and consequences of fire-and-rehire before considering the legal framework to work within. When it comes to fire-and-rehire, malpractice can cause great damage to both the employer and the employee.

Employees may refuse to accept contract changes

A consequence of fire-and-rehire may be that employees may refuse to accept the contract change, causing them to leave their position for good. This may eventually lead to high staff turnover rates if fire-and-rehire is standard practice at an organisation.

Employees’ best interests are ignored

Another concern expressed by ACAS is that there may be many cases where employers are ticking a box, as opposed to genuinely seeking agreement with an employee, meaning what is best for the employee is not considered.

Lack of transparency

This practice raises concerns regarding the transparency of an organisation. If fire-and-rehire is a common process at an organisation, it may be that an employer is using this as a cover to lessen working terms and conditions. This may call into question an organisation’s treatment of staff and their ethics, resulting in a loss of credibility.

Promotes employee vulnerability

A great concern for governing bodies regarding fire-and-rehire is employee vulnerability, and how this may affect the negotiation process. If an employer/employee relationship is strained, and trust is not present, renegotiating a contract may be unfair to the staff member in question, with possible ulterior motives of the employer present. These hidden motives call into question the authenticity of an employer’s actions and may cause an employee’s rights to be infringed upon, with some cases even seeing this tactic used as a threat.

Fire-and-rehire best practice

There are circumstances, however, where fire and rehire can be used as a genuine last resort or solution to a problem. Understanding the consequences and best practices of fire-and-rehire is vital to any employer. If you’re looking to renegotiate or change contractual terms with an employee, knowing best practices will protect both you as an employer and your staff.

According to the guidance provided by ACAS, employers should:

• Explore all options before coming to the fire-and-rehire decision
• Consider how to communicate proposed changes, taking into account additional needs such as hearing requirements or if an employee’s first language isn’t English
• Inform all affected employees as soon as possible, from upper management to staff representatives
• Inform and consult with those affected in a genuine and meaningful way
• Look into alternative options and reach a consensus in order to be constructive

Following the guidance provided by ACAS is the best way to conduct fire-and-rehire that’s right for the employee, whilst continuing to protect your organisation. Knowing the rights of the employee and your rights as an organisation is key when conducting this process.

How Staffology can help

Conducting fire-and-rehire or dismissal and re-engagement ethically and lawfully is vital for any organisation, and supporting your employees in the way you need to shouldn’t have barriers. Discover HR software that empowers your employees with the information they need, at every step of the journey.

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Duane Jackson, August 11th, 2022

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