Re-employing workers on different terms is a legal minefield, says KAREN HARVIE
It’s not an understatement to suggest that we are facing a summer of discontent with thousands of workers from different sectors either on strike or threatening to walk-out as they face the prospect of seeing their income eroded by the rising cost of living.
At the same time, the pandemic and Brexit have created challenges fo businesses trying to rebuild, with many looking for ways to restructure and possibly cut costs. The biggest outlay for any business is usually its people.
While this has led to redundancies at some companies seeking to reduce their costs, other employment-related issues are attracting closer scrutiny. One is the practice of “fire and re-hire”.
Some of the more high profile cases in recent times have concerned British Airways, Tesco and British Gas and in every situation the company involved has endured various degrees of damage, such as industrial unrest, not inconsiderable expense and unwanted media attention.
The practice of fire and re-hire, also known as dismissal and re-engagement, is an option to an employer who wishes to make changes to the terms and conditions of employees’ contracts. This could be around pay, pensions, shift patterns, rest breaks or holidays.
The pandemic, and subsequent economic issues have led many employers to review their operating models to ensure they well placed, not only to survive, but grow. Changing employment terms and conditions can play a role in this.
In the first instance, best practice would be for employers to negotiate with a trade union or workers’ representatives, but in the absence of any agreement an employer could dismiss its employees and then offer to hire them back, but on different terms.
The practice is risky for employers as it will only be fair – that is, there will only be a defence to a claim of unfair dismissal – if the employer can demonstrate a sound, good business reason for it, or that it was a reasonable step to take, and a fair procedure was followed.
There are many justifiable reasons why an employer may wish to change terms and conditions but there are also suggestions that some might have used the pandemic as a pretext to simply reduce or diminish workers’ terms and conditions.
A survey from the Trades Union Congress indicated that 9% of workers had been told to reapply for their jobs on worse terms and conditions since March 2020, and there is some anecdotal evidence that the policy is becoming more widespread.
The policy itself is not illegal, though it’s fair to say that employers must follow a long process before embarking on any action. This includes formally consulting with workers and unions and observing set notice periods.
In many cases, employment rights only begin after two years’ service and until then employees can be dismissed, usually with only a week’s notice, without the right to bring an unfair dismissal claim.
In addition, at some firms, employees can acquire more rights the longer they work – this might include better redundancy terms – the fire and re-hire process won’t reset years of service to zero.
All matters concerning employment can be complex and practices such as fire and re-hire should not be undertaken lightly. Failure to carry out the proper procedure can result in employers facing legal challenges – costly and reputationally damaging.
There remain tough economic times ahead for the business community, and difficult, sensitive decisions around employment may have to be taken. Following the rules is not optional and it will be the foundation of a constructive and healthy relationship between you and your employees.
Karen Harvie is a senior associate in employment law at Aberdein Considine
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