Government responds to Fire and Rehire Code of Practice

We look at what the Code is likely to include and what this might mean for employers.  

What is the Code?   

The Code sets out how employers should act when they want to change employment terms and conditions, if they are planning to dismiss and re-engage workers. The Code means that employers must consult their employees and look into alternative options, without raising the prospect of dismissal unreasonably early or threatening dismissal to influence the course of negotiations if they are not actually considering dismissals. Under the Code, employers should use dismissal and re-engagement only as a last resort.  

What did the government say they will do?  

The consultation took the form of ten questions and input was sought from various interest groups. The government responses were as follows:   

Question 1:  The scope of the Code  

Government response  

The Code will cover situations regardless of how many employees are affected or the reasons for the proposed changes to the employees’ terms and conditions.  

To make it clear that the Code applies both to situations where there is no collective bargaining agreement in place, as well as those where it is, any reference to ‘negotiation’ has been removed.  

The Code also excludes redundancy scenarios because the Employment Rights Act 1996 sets out clear legal principles as to what an employer should do in a genuine redundancy situation.  

The Code won’t apply where an employer is only considering making employees redundant under the 1996 Act; however, if they are looking at both redundancy and dismissal and re-engagement in respect of the same employees, the Code will apply as long as dismissal and re-engagement remains an option.  

Question 2:  Re-examination of business plans  

If employees make clear they won’t accept contractual changes, employers must look again at their plans (rather than both business strategy and plans, as was the case in the draft Code) taking account of feedback received and suggested factors.   

The Code has been re-ordered from the draft version so that the information-sharing and consultation provisions now come before the section on the employer’s reassessment.   

Question 3:  Business reasons  

The list of factors which an employer should consider, depending on the circumstances (listed in paragraph 22 in the Code) remains the same as in the draft Code. The list of factors already requires employers to think about the effect their proposed changes might have on employees; this means thinking about their relationships with employees or trade unions, the potential for strikes and the risk of losing valued employees.  

Under the Code, not all employers will have to carry out an Equality Impact Assessment. Employers should consider if their proposals could have a greater effect on some employees than others, including on the basis that they have a protected characteristic under the Equality Act 2010.  

Question 4:  Information-sharing  

The Code requires employers to share as much information as possible with employees, suggests appropriate information to consider, and requires employers to answer any questions or explain the reasons for not doing so.   

The Code has now been revised so that the information-sharing and consultation sections come early in the Code and before the section on reconsidering the need for changes.  

The information-sharing provisions contained duplication so that has now been removed as well. The Code now says that it is best practice for employers to provide information in writing, rather than making it a requirement.  

Question 5:  Types of information provided 

The draft Code had two separate lists of information but they have now been merged into one list, and ‘proposed next steps’ has been added.  

It is not necessary to clarify that employers may not be able to share commercially sensitive information, as the Code notes that an employer may occasionally reasonably be unable to provide information, and that they should explain the reason(s) for this as fully as reasonably possible e.g. commercially sensitive.  

Question 6:  Re-assessment of factors  

The draft Code required the employer to reassess their analysis and carefully consider suggested factors before making a decision to dismiss staff.  

Since the Code was re-ordered, it was felt that this step was too much like the re-examination that employers have to do after information-sharing and consultation. Amendments have been made so that employers no longer have to carry out a full re-assessment of their plans at this stage.   

Question 7:  Mitigations  

The Code recommends that employers consider phasing in changes as best practice, rather than an obligation, because it won’t be appropriate in all circumstances. The list of practical support that employers should consider offering employees has not been amended as it is non-exhaustive.  

Question 8: Industrial relations  

The government’s view is that the Code will promote improvements in industrial relations by ensuring that employers take all reasonable steps to explore alternatives to dismissal and re-engagement as well as engaging in meaningful consultation to reach agreement with employees and/or their representatives in good faith, with an open mind.  

Question 9: Balance of employee protection and business flexibility

The Code strikes the right balance between protecting employees who are subject to dismissal and re-engagement practices, while retaining business flexibility to change terms and conditions. There are some situations in which dismissal and re-engagement can play a valid role, so a total ban would not be helpful.  

Question 10:  Other matters 

The Code highlights legal obligations that are likely to apply to many businesses and they must ensure they comply with those obligations, as well as any other relevant legal obligations.  

To ensure greater clarity, a paragraph has been added to specify that, where the Code says a party “must” do something, this indicates a legal requirement, and where it says that a party “should” do something, this indicates an obligation under the Code.  

All obligations in the Code have been made more specific wherever possible.   

The Code no longer states that employers and employee representatives continue to engage in discussions which remain open to the possibility of reaching agreement on the new imposed terms after dismissal and re-engagement has taken place. This is because that could be seen as an open-ended obligation, thereby contradicting the position that dismissal should only be used as a last resort. The Code now says that it is good practice for the employer to invite feedback about the changes, and consider what might be done to mitigate any negative effects on employees.  

Failure to comply with the Code   

The effect of failure to comply with the Code is not set out within the Code itself. It is set out in S207A of the Trade Union and Labour Relations (Consolidation) Act 1992. The government will bring forward secondary legislation to amend the Act so that the protective award for non-compliance with collective consultation requirements is added to the list of claims that could attract the 25% uplift in compensation.  

ACAS involvement  

The paragraph on employers contacting ACAS has been strengthened so that this now has to happen before they raise the prospect of dismissal and re-engagement.   

This will help ensure that the employer really does only opt for dismissal and re-engagement as a last resort. They will be more likely to contact ACAS earlier in the process, making it more probable that this will help the parties reach an agreed outcome.  

rradar recommends:   

For many employers, as we have seen, dismissal and re-engagement is a last-resort option. Nevertheless, not paying attention to the legal requirements surrounding this practice will only cause further difficulty. The services of an expert legal advisor can save a business from costly mistakes.  

rradar solicitor Nkolika Oraka said:  

“Ultimately the Code is not necessarily presenting anything that we do not already advise clients to do anyway when it comes to dismissal and re-engagement but what it does mean is that such dismissals will be more scrutinised going forward and there will be a higher price to pay for employers if they fail to get things right and act cautiously. 

“As always, dismissal and re-engagement on new terms must be an absolute last resort, aside from a redundancy situation of course, but even then, we always say that all other avenues must be considered.”