The government has this week announced a revised position on the controversial ‘fire and rehire’ practice, easing the stricter measures it initially proposed. When plans were first unveiled last year, the aim was to ban employers from dismissing staff who refused changes to their employment contracts. However, the latest update signals a more flexible approach.
Currently, employers are prohibited from dismissing and rehiring employees unless they have a ‘sound business reason’ for making contractual changes. This typically includes financial pressures, such as the need to reduce costs by adjusting pay, holiday entitlement, or working hours. When negotiations fail, some employers have resorted to dismissing staff and offering to rehire them immediately under revised terms - a practice known as ‘fire and rehire’. In recent years, cases involving Tesco and P&O Cruises have brought this practice into the spotlight.
The Employment Rights Bill initially proposed that such dismissals would be automatically unfair unless the changes were essential to prevent calamitous financial distress and the employer had followed a six-point consultation checklist. However, the government has now removed the requirement to follow to this checklist. Instead, tribunals will apply the standard test of reasonableness when assessing unfair dismissal claims. The revised proposal limits the ban on ‘fire and rehire’ dismissals to specific ‘restricted variations’ namely changes to pay, pensions, working hours, and holiday entitlement. If an employee refuses to accept a non-restricted variation, their dismissal would not be considered unfair. In such cases, tribunals would still follow the six-point consultation checklist.
Looking ahead, employers will need to pay close attention to the newly defined ‘restricted variations’ as these now carry a heightened risk of unfair dismissal claims. This development is likely to reshape how employers manage contractual variations, placing greater emphasis on meaningful consultation and careful negotiation with employees.
For further advice on the Employment Law Bill or any other employment law issues, please contact Thorntons Employment Law team on 03330 430350.
