Key takeaways

• Last year, the government announced that it would introduce a new statutory Code of Practice on employers using "fire and rehire" practices to implement changes to employees' terms and conditions of employment.  
• The draft Code (Code) does not impose any legal obligations on employers and there is no freestanding liability for breach. However, the Code will be taken into account by employment tribunals and courts in relevant proceedings (e.g., unfair dismissal claims), who may adjust any award it makes by up to 25% if either party failed to comply with the Code (although in practice it imposes very few obligations on employees). 
• The Code sets out the steps that an employer proposing to make changes to terms and conditions should take. While the Code envisages that dismissal and re-engagement is a permissible option if the employer cannot obtain consent to the changes from the employees, the strong direction is that this should be a last resort option, following proper information and meaningful consultation with the impacted employees. 
• The purpose of the Code is "to ensure that an employer takes all reasonable steps to explore alternatives to dismissal and engages in meaningful consultation with trade unions, other employee representatives or the individual employees in good faith, with an open mind, and does not use threats of dismissal to put undue pressure on employees to accept new terms, instead of seeking to find an agreed solution". Employers considering implementing the changes without employee consent should:
  • first "re-examine its business strategy and plans in light of the potentially serious consequences for employees" including considering whether there are any alternative approaches it could take and whether its plans give rise to any discriminatory impact;
  • "share as much information regarding the proposals as is reasonably possible" and the "information should generally be provided as early into the process as possible";
  • conduct consultation that is meaningful and in good faith. The threat of dismissal "should never be used only as a negotiating tactic in circumstances where the employer is not, in fact, contemplating dismissals as a means of achieving its objectives";
  • while there is no prescribed timeframe for consultation, the Code states that "a longer consultation period is likely to allow for a more in-depth discussion" and 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";
  • if changes are agreed with the employees, these should be properly documented in writing;
  • even where the employer has contractual power to impose the changes unilaterally, it should document the changes in writing and "continue to discuss the changes with the employee or their representatives" and "consider whether there are particular impacts on any employee or groups of employees which relate to a protected characteristic";
  • if, as a last resort, the employer concludes, following a thorough and open information and consultation process, that it is "truly necessary" to impose the new terms and there are no alternative options, it should take steps to minimise the impact on employees including giving as much notice as possible of the dismissal taking contractual notice as the minimum, considering whether there are any particular employees who might need longer notice to help them accommodate the changes, for example, to arrange childcare if the changes involve working hours, considering phasing in the changes over a longer period of time or making the changes subject to a trial period, and/or providing other practical support to employees such as relocation assistance, career coaching or counselling for emotional support;
  • even after the new terms have taken effect, it is still "good practice for the employer to continue to monitor the impact of the imposed changes over time" and "continue to engage in discussions which remain open to the possibility of reaching agreement on the new imposed terms".
  • The government is seeking views on whether all steps in the Code are necessary and whether it strikes the right balance between protecting employees and retaining flexibility for businesses, as well as any other comments.  The consultation closes on 18 April 2023.