In this new series from TJD Law, we’ll be shining the spotlight on a different hot topic of employment law each fortnight, and with Labour’s sweeping employment law reforms, there’s certainly plenty to talk about. We’ll be revealing the truth behind the headline-grabbing scare stories and summarising the bits you need to know about the stuff that really matters.
This week, we’re looking at the recent Supreme Court decision in Tesco Stores Ltd v USDAW and concept of ‘fire & rehire’ – what is it? why is it problematic? and what plans does the Government have for it?
Fire & Rehire
‘Fire and rehire’ is a colloquial term for situations where employers seek to unilaterally impose changes to terms of employment, having failed to secure agreement to those changes though consultation. It describes the process of giving notice to end the current contract of employment, with the offer of immediate engagement on an identical contract, save for the term(s) being changed. As there is no break in service, continuity of employment is preserved, but often at the cost good employee relations.
It has received a lot of negative reporting in the press because the process is often abused – some employers using it as first point of call (rather than a last resort) and others as a tool to reduce worker pay and benefits, despite making considerable profits.
Consequently, Labour pledged to end the practice, and this commitment recently found support with the Supreme Court who granted an injunction to prevent Tesco using fire & rehire as a means of removing an element of enhanced pay from its workers. That decision was, however, based on some unusual facts whereby the payment in question had been negotiated as part of an earlier restructuring, and was explicitly stated to be “permanent” for as long as staff remained in their role. That wording was sufficient to override the general principle that employers cannot be restrained from terminating a contract of employment, but as most employment contracts will not carry such wording, the case will have limited applicability.
More generally, the task of prohibiting fire & rehire is not straightforward, or necessarily desirable. Businesses need to evolve over time and there will always be scenarios where an organisation, through no fault of its own, has to consider changing its employment contracts. This might be because of customer demands, changes in the market, technological developments, or financial difficulties. If the driving force is a legitimate one, and the employer has explored all reasonable alternatives through genuine consultation, then fire & rehire may be the only viable option to secure the future of the business.
As such, instead of prohibiting it, the previous Government published a draft “Code of Practice on Dismissal and Re-engagement” for employers should follow, failing which financial penalties can arise. The Code isn’t live yet, but the draft can be viewed here:
consultation_document_code_of_practice_on_dismissal_and_re-engagement.pdf
Labour says the Code does not go far enough but, rather than ending the practice, it is more likely that they will seek to modify the Code by strengthening the remedies and potential penalties for abuse. We’ll report back once the updated Code is ready to be implemented!