In brief

‘Fire-and-rehire’, the practice in which employers can dismiss employees and engage them on new/different terms (usually where consent is not obtained) has recently been in the spotlight, following reports suggesting that their use has increased during the pandemic. In October 2020, the Department for Business, Energy and Industrial Strategy (BEIS) commissioned Acas to carry out an independent and impartial fact-finding exercise to inform BEIS’s strategy on this issue. Acas has now published its report into that exercise.

Key takeaways

Acas’ report summarizes the evidence gathered from 15 participating organizations consisting of employer bodies; trade unions; professional bodies and networks with advisory contact with employers, covering employment lawyers, accountants, HR and payroll services; academics; and Acas senior advisers.
Acas was not asked to (and has not) presented any recommendations to the government on this area.
On 8 June 2021, Paul Scully MP, Parliamentary Under-Secretary of State for BEIS, confirmed that the government is not proposing to devise “heavy-handed legislation” to ban fire-and -rehire at this stage. However, he confirmed that BEIS has asked Acas to prepare clearer guidance on when fire-and-rehire should be used and good practice for employers. He also warned that fire-and-rehire should not be used as a negotiation tactic and noted that “nothing was off the table”.
Employers contemplating use of this practice should be aware of the increased public and employee relations risk of doing so, and watch for developments in this area.

For advice or to discuss what this means for you and your business, please contact your usual Baker McKenzie contact.

Background

BEIS was particularly interested in more clarity around:

whether fire-and-rehire is a new practice, brought on by the pandemic?
its prevalence;
the contexts in which fire-and-rehire is used – is it used as an unavoidable last resort, as a heavy-handed negotiation tactic, or in other ways?
stakeholder insights and views on the practice and on whether policy interventions are needed from government and/or others to address the issue.

A summary of Acas’ findings are as follows:

Fire-and-rehire was described as a longstanding practice pre-dating the pandemic. However, there was a sense amongst some of the participants that the practice has been become more prevalent in recent years.
A number of trade union participants observed that not only has the practice increased during the pandemic but that it has also been used “in a different way to past occurrences”, with some commentary that employers appeared to be introducing it earlier in the process in seeking to “bypass” established negotiation processes.
The use of the practice is widespread and is not exclusive to large organizations or certain sectors.
The practice has generally been used to avoid or minimize redundancies and/or to change terms and conditions, for example, harmonization particularly as part of a post-acquisition/TUPE transaction, to introduce flexibility into contracts, and disrupt continuity of service particularly for those employees who have less than two years’ service so would not qualify for ordinary unfair dismissal rights, and to manage changing customer or operational needs.
There was no agreement on when the use of fire-and-rehire may be regarded as reasonable.
Suggestions for reform include legislative and non-legislative options. These are options put forward by the participants and are not recommendations of Acas.
Suggested legislative options included: strengthening the law on unfair dismissal, enhancing the requirement and capacity for employment tribunals to scrutinize business’ rationale for change in relevant cases, protecting continuity of employment in fire-and-rehire-scenarios, and strengthening employers’ consultation obligations around proposed dismissals.

Suggested non-legislative options included: improved guidance for employers, using data on fire-and-rehire to inform decisions around public procurement and access to government funding, and ‘naming and shaming’ employers who use fire-and-rehire practices on a government website.