The Employment Rights Bill seeks to put an end to the controversial practice of ‘fire and rehire’ to prevent ‘unscrupulous’ employment practices, even where the employer can demonstrate a “sound business reason” for its decision.
The term ‘fire and rehire’ refers to the practice of enforcing changes to an employee’s terms and conditions of employment by way of dismissal and re-engagement.
The proposal is in response to the perceived unfairness of an employer’s ability to terminate an employee’s contract of employment and re-engage them on new, less favourable terms, in circumstances where the employee does not agree to a variation of their current contractual terms.
Whilst the Bill doesn’t go as far as placing an outright ban on ‘fire and rehire’, it seeks to severely restrict an employer’s ability to adopt such a practice by making it automatically unfair to dismiss an employee for refusing to agree to a variation of their contract of employment. This means that no consideration will be given to the reasons why the employer was seeking to change the terms, or the reasonableness of the employer’s conduct in doing so. However, the Bill does provide an exception where the employer can demonstrate that the business is facing severe financial difficulties and there is no other option.
Changing terms and conditions of employment is a complex area and one which can cause difficulties when trying to balance the needs of the business and the rights of staff. This strict new approach will make it significantly harder for employers to change any contractual terms in response to evolving business needs, without the employee’s agreement. If an employee does not agree to a change, the employer cannot proceed without being at risk of an automatic unfair dismissal claim.
It remains unclear when these reforms will come into effect but, in the meantime, employers should start to prepare in order to mitigate any risks to the business:
- Update existing contracts/draft new contracts to ensure the inclusion of variation/flexibility clauses which allows the business to make reasonable changes without the need for consent.
- Consult employees clearly about proposed changes and their impact, and maintain open communication throughout the process, with a view to seeking their agreement.
- Consider an incentive, such as a pay rise or bonus, to encourage employees to agree to proposed changes.
- If the exemption of financial collapse applies to your business, gather the evidence you will need to rely on this defence.
If you need any advice or assistance with this complex area of law, please contact us on 0345 646 0406 or complete an online enquiry form, and a member of the team will be in touch.