Acas' new fire and rehire guidance: Consider all options
In June, in response to the COVID-19 pandemic, there was a surge in businesses attempting to fire and rehire employees on lesser contractual terms. As a result, ACAS published a government-commissioned report and evidence on the use of such practices.
Acas has now published further 'good practice' guidance designed to persuade employers to consider all options before using fire and rehire practices.
What is 'fire and rehire' and when is it used?
Where an employer wishes to make contractual changes to an employee's terms and conditions, the consent of the employee is required. If an employee is unwilling to accept the new terms, an employer may make the decision to impose them unilaterally, however, by doing so the employer runs the risk of a breach of contract or constructive unfair dismissal claims being brought against them.
The practice of firing and rehiring employees on the new terms is therefore often used as a 'lower risk' alternative; provided that the correct contractual notice is given, breach of contract or wrongful dismissal claims are avoided. However, it is not to say that this practice does not come with its own risks: it may damage staff morale, productivity, working relationships, and increase the chances of unfair dismissal or discrimination claims.
What does the new Acas guidance recommend?
In an attempt to reduce the use of the extreme fire and rehire practice, in its new guidance, 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 any absent employees e.g., off sick, or on adoption, maternity or paternity leave, and the possibility of using alternative methods of communication because of a disability or if English is not an employee's first language.
- Inform all effected employees and their representatives about the proposed changes and provide clear information as early as possible.
- Consult with all employees and their representatives in a genuine and meaningful way about the proposed changes.
- Keep discussions constructive and encourage alternative solutions.
What if agreement to contractual changes still can't be reached?
If all options have been explored and, after extensive attempts, an agreement still cannot be reached, the fire and rehire practice stands as an available practice to make the proposed changes. However, in its new guidance, Acas stresses that this should now be used as a last resort.
We would advise employers to act with caution; fire and rehire processes are complex. Employers should ensure that they consider all possible alternative options and engage in meaningful, constructive discussions and consultations with employees prior to proceeding with the fire and rehire practice. If the decision to proceed with this practice is made, employers should ensure that the correct contractual notice is given.
If a claim is subsequently brought by an employee, an Employment Tribunal will consider the facts of each case and will expect an employer to evidence why the contractual changes were necessary, in addition to showing that a fair procedure with a proper consultation process was followed.
We recommend seeking legal advice prior to making rash decisions where there is any uncertainty on the above practices.
The new Acas guidance can be found here.