Although somewhat contentious, when it is handled properly, it is not illegal. It also is not anything new, despite the media recently disclosing several high-profile brands who have chosen to use fire and rehire to tackle the financial burden brought about by the Covid-19 pandemic.
But what are the other options and where do business owners, or for that matter their employees, stand from a legal perspective when it comes to fire and rehire?
Is firing and rehire legal?
Though illegal in Ireland, Spain and France, at present fire and rehire is a widely acceptable employment practice across the UK. It is so common in fact, that a study conducted by the TUC revealed that, since the start of the pandemic, one in 10 UK workers have found themselves in a situation where they have had to reapply for their jobs on inferior terms or risk being permanently dismissed.
Employees with under two years’ service are at the greatest threat of falling victim to such a scheme as they simply do not have the employment rights to protect them, but anybody can be targeted.
Trade union Unite has been hugely critical of the exercise, citing the additional pressure that it puts on the workforce during a time of already enormous difficulty following the Covid-19 outbreak, during which extensive government support was made accessible to employers, including provisions like the Coronavirus Job Retention Scheme.
A survey undertaken by the GMB union supports this judgment by revealing that three-quarters of people disagree with fire and rehire, believing it should be outlawed. But for now, at least, the system continues to provide a viable option for any organisation that needs to manage a particularly complicated issue.
When is Fire and rehire used?
Typical situations whereby a business owner might opt to embark on a fire and rehire scheme include:
What are the risks associated with fire and rehire?
There is no simple way for an employer to amend an employee’s terms of employment, especially if said changes are deemed to be detrimental to the employee. It is likely all options will be contested by the employee (or their trade union).
Terminating an employee’s contract and proposing a revised one that stipulates reduced salary or revoked benefits could open employers up to potential employment tribunal claims. Dismissed employees, if they have the required length of continuous service, could launch a claim for unfair dismissal/constructive unfair dismissal. They might also look to sue for breach of contract or unlawful deduction of wages claims in the civil courts and Employment Tribunal respectively.
If business owners fail to offer the appropriate statutory/contractual notice period during the process, they could face further claims of wrongful dismissal.
What is more, it is important to recognise the damage that this kind of action can have on a business’s reputation, especially when websites like Glassdoor provide potential new recruits with a detailed overview of a workplace’s employee wellbeing records. In fact, 67% of contributors to a GMB union survey indicated that they would be far less likely to want to work for an organisation that had used the practice of fire and rehire, which could have major ramifications for employers in the future.
Are there other options?
The decision to proceed with the dismissal and rehire of any employee should only be taken once the employer has properly considered the risks of legal action and the impact that it could have on employee engagement and morale.
Firstly, employers should review existing contracts to check for flexibility clauses. This may provide employers with the opportunity to make certain changes, however, it is worth noting that many unilateral amendments cannot be enforced regardless of the inclusion of such a clause. Instead, a period of meaningful consultation should be initiated to reach a mutual agreement on the changes.
In terms of the process itself, ACAS recommends a full and fair dismissal procedure is observed, employees are offered the right to appeal and that they are given adequate notice (statutory or contractual, whichever is longer).
In summary, even though fire and rehire is legal, it is often considered to be controversial, so employers should be unwavering in their belief that on balance, it will be worth it.
- Tina Chander is the head of employment law at Midlands law firm, Wright Hassall.