The UK Government announced that it would introduce a new statutory Code of Practice on the use of 'fire and rehire' practices to bring about unilateral changes to employees' terms and conditions, following the dismissal of 800 P&O Ferries employees without consultation.
By law, where an employer proposes to make largescale redundancies of 20 or more employees within 90 days or less, it must consult on its proposal with the employees' representatives (s188 Trade Union and Labour Relations (Consolidation) Act 1992). P&O dismissed a quarter of its workforce without consultation or notice in March 2022, telling them that "cheaper alternatives" would take their roles. P&O stated that it made the "difficult decision" as a "last resort" to save its business.
In a nutshell
The Code has been published in draft for the purpose of a 12-week consultation period - draft Code of Practice.
The Code sets out the steps that an employer should take when considering changes to employees' employment contracts when predicting that it may dismiss employees who do not agree, and so wishes to offer either re-employment on new terms, or take on new employees under the updated terms.
Under the Code, once it is clear that employees will not accept the new terms without negotiation, but the employer decides that it still needs to implement those changes, employers should review their business strategy in light of the potentially serious consequences for employees. Such considerations could include: economic, business and/or financial reasons; organisational reasons and human resource reasons.
Changes to terms and conditions
The Code states that employers should share as much information with employees as is reasonably possible, and engage in meaningful and good faith consultation even where it is unlikely that the employees or their representatives will agree to the proposed changes. Employers should also take all reasonable steps to explore alternatives proposed by the employees.
It is also noted that employers should be transparent as to the fact that, should negotiations fail, they are prepared to attempt to unilaterally impose changes or dismiss employees to force changes. The Code does however set out that a threat of dismissal should never be used solely as a negotiation tactic in circumstances where the employer is not contemplating dismissal.
With regards to the timing of the consultation process, this will depend on the circumstances. The Code states that a longer consultation period is likely to allow for a more in-depth discussion and deeper understanding of the proposals and any objections, facilitating an ultimately more thorough exploration of each parties' options and strengthen the possibility of matters being resolved by agreement. The Code also notes that it is unusual for it to be detrimental to consult for a lengthy time period, even taking into account that this can be an unsettling time for employees.
The Code states that, in the absence of agreement, employers should not consider unilaterally imposing changes to terms and conditions unless satisfied that all reasonable alternatives which may result in agreement have been fully explored.
Dismissal and re-engagement
The Code very much emphasises that the decision to dismiss and re-engage the employees should be treated as a last resort where an employer considers it cannot achieve its objectives in any other way.
In such circumstances, employers should give as much notice as possible of the dismissal, and consider also whether any particular employees may need longer notice in order to make arrangements which may better enable them to accommodate the changes – such as childcare or travel arrangements. The consultation process will end on 18 April 2023, and the Code will be introduced when Parliamentary time allows.
It is unsurprising that the UK Government is seeking to provide weighted guidance following a number of high profile mass dismissals in recent years. The Code is not banning the practice of dismissal and re-engagement altogether but rather instilling some parameters for such a process.
As always the best way to change terms and conditions is by agreement. Engaging with the workforce in a collaborative way has always been the preferred route to implement change, with dismissal and re-engagement as a last resort. From an industrial relations point of view following a clear process, consulting and re-examining business strategy are all sensible steps for employers to take.
However, with the difficult economic climate many employers are having to consider carefully their workforce strategy and may feel that the Code simply adds another level of bureaucracy.
Authored by Anna McCarthy