Employers – how to avoid fire and rehire practices

Businesses have learnt many lessons over the past twenty months, some harder than others, and are now emerging with new and revised ideas of how they wish to progress.

As a result, we have seen, and continue to see, changes to not only operational business matters but also the structure of workforces; working practices, arrangements, and policies; and employment terms and entitlements.

A contract between an employer and an employee/worker is a legally binding agreement and any changes should be agreed between the parties. However, over recent times we have seen an increase in employers operating a “fire and rehire” practice in order to impose contractual changes to staff terms and conditions of employment. This has significant legal risks for organisations that may find themselves faced with legal proceedings, and can seriously damage working relations.

ACAS has therefore published new guidance aimed at helping employers maintain good employment relations and reach agreement with staff if they are thinking about making changes to their contracts. We summarise the advice for employers below:

1. You should consider what issue you are trying to address and explore different ways of achieving it. Is a contractual change definitely needed to solve the issue?
2. Where you feel you may need to propose a contract change, understand your options for exploring the change with staff. Consider:
   - The number of employees and workers affected; and
   - Whether the organisation has a recognised trade union or other established ways of consulting employees.
3. Inform all affected employees and workers and any relevant employee representatives (including those who are absent), in writing, of:
   - The proposed changes;
   - The business reasons for the changes;
   - The timeframe for the proposed changes;
   - Your view on how the changes could benefit staff;
   - Your view on how the organisation will be affected if you do not make the changes; and
   - Any other alternative options that have been considered and why they are not appropriate.
4. Give employees, workers and any representatives time to understand, consider and reach an informed view about the proposed changes, assure them that you want to hear their concerns and suggestions, and let them know that you want everyone to work together to find solutions if there is any disagreement about the proposed changes.
5. Fully consult with affected employees, workers and representatives (including those who are absent) about the proposed changes – talk and listen to them. You should:
   - Ask for their feedback on the proposed changes;
   - Answer any questions and respond to any concerns;
   - Consider other proposals they may put forward;
   - Consider if you should make any revisions to the proposed changes to address any objections and/or points raised; and
   - Offer help and support, for example, through an Employee Assistance Programme if there is one. Employers should consider providing training for managers and employee representatives involved in consultation and negotiations.
   
6. If the employment contract changes are agreed, you should confirm any changes in writing and make sure that everyone is clear about the details of the changes and how and when these will take effect. There are certain circumstances where you must update someone’s written terms of employment, for example, if the change relates to matters such as job title, job description, location, pay etc.
7. You should also monitor the change for a period and review if the changes are working as expected and being applied consistently and fairly.
8. If the employment contract changes are not agreed, you should continue to explore all options and continue consulting with employees, workers and representatives. This may involve making the proposed changes easier for people to agree, for example, by offering some new, more beneficial terms to compensate for less attractive changes to other terms. However, it is important that you do not make direct offers to employees and workers as an incentive to give up any of their contractual terms where there is a collective agreement in place.
9. If you are unable to reach an agreement after extensive attempts, it may be possible to introduce the contractual change by giving notice of the intended change to affected employees and workers, or terminating existing employment contracts and offering to rehire staff on the new terms.

Dismissing and rehiring

This should be considered by employers as a last resort and once all reasonable attempts have been made to reach agreement through a full and through consultation.

It is important to consider that by ending an employee’s original employment contract you will be dismissing them and will need a fair reason for doing so and have followed a fair dismissal process.

The use of the “fire and rehire” practice comes with significant risks including damaging trust and working relations, losing valued people from the organisation, reputational damage and legal claims.

As ACAS has advised, organisations that consult with their workforce in a genuine and meaningful way about proposed changes are more likely to build trust with their staff, keep them motivated and prevent conflict at work.

Although it can sometimes feel difficult and time-consuming to reach an agreement on a contract change, there will be significant risks if an employer tries to change contractual terms without agreement.

If you are considering making contractual changes and require any assistance or legal advice, the Employment Team at Thackray Williams would be happy to help and can be contacted on 0208 290 0440.