UK supermarket giant Tesco has recently been embroiled in an ongoing saga with its employees over its fire and rehire practises, culminating in a court battle with the shopworkers union, Usdaw. While fire and rehire has been a contentious issue for several years, it reached particular prominence during the pandemic, with several high-profile cases involving major companies bringing it to the forefront of the media cycle.

 

Just before Christmas, the Supreme Court gave Usdaw the green light to challenge Tesco’s firing and rehiring of workers on less favourable contracts than the ones they were on previously. Prior to this, Tesco employees had a right to retained pay, which was withdrawn in January 2021. The Court of Appeal had previously overturned a decision by the High Court which banned Tesco from firing and rehiring employees on lower pay at its warehouses in Daventry and Litchfield.

 

Want to find out more about what fire and rehire is? Keep reading.

 

What is fire and rehire?

 

We’ve briefly touched on the concept of fire and rehire already, a practise which allows employers to dismiss their employees by employing them on terms which are better suited to the employer rather than their employees. We will now go into a bit more detail in order to expand on the concept.

 

Strictly speaking, fire and rehire is not illegal. However, it is certainly a controversial practise and there have been calls by some to outlaw it completely. Despite being lawful, it can cause significant issues in the workplace in terms of workplace relations, morale, and performance. ACAS, a non-departmental body which works with employers and employees produced guidance on the use of fire and rehire practises in 2021. You can read this guide here. ACAS firmly outlines in this report that it considers that fire and rehire should be an option of last resort.

 

As an employer, should you use fire and rehire?

 

We would advise that employers should attempt to avoid fire and rehire at all costs, and instead should attempt to consult employees in a genuine and meaningful way. Employers which are transparent about their plans to change their employee’s contracts are likely to face a smoother ride further down the line, such as avoiding legal action. In the case of Tesco and its withdrawal of retained pay, this was not the case. Fire and rehire, also known as dismissal and engagement, has the potential to expose employers to statutory and contractual claims such as unfair dismissal.

 

While there is a difference between when companies in financial trouble terminate employees’ contracts and rehire them on new terms and when companies pressure low paid workers into agreeing to inferior terms, both should be avoided where possible.

 

If you do decide to go ahead with fire and rehire, and it affects more than 20 people, then by law you must collectively consult them on the proposed dismissals. Also, remember that even if you plan to rehire the employee, you are still dismissing them. As a result, you must:

 

  • have a fair reason for dismissal
  • follow a fair dismissal process
  • provide the correct amount of notice
  • offer the employee the right of appeal against their dismissal

 

The government announced in March 2022 that a new statutory code would be published which will detail how businesses must hold fair, meaningful and transparent discussions with employees when it comes to proposed changes to employment terms. This came following proposals by the Labour Party to outlaw fire and rehire practises completely following the P&O ferries scandal. However, the government itself does not however plan to make the practise of fire and rehire illegal. As of yet, no date for the introduction of the code has been set.

 

What to do if you are considering contractual changes for employees?

 

Fire and rehire happens as a result of a business wishing to change its employees’ contractual changes. As a result, you should be aware of the process by which an employees contract can be changed and the risks involved.

 

While it might sound obvious, it is important to remember that an employment contract between an employer and an employee is a legally binding document. The terms and conditions of an employment contracts can be agreed in a couple of ways:

 

  • In writing, such as a job offer letter
  • Verbally, such as when you first taken a job

 

However, there are several methods by which contracts can be changed:

 

  • A change is proposed by you or one of your employees, which you then discuss and agree with them
  • A collective agreement is made with a trade union, who then agree terms and conditions on behalf of your employees and workers.
  • Employees or workers agree to a clause in the contract which allows you to change certain employment terms in their contract unilaterally
  • A change occurs over time, with everyone’s agreement implied. This is known as custom and practise.

 

There are several things you should also consider when it comes to making changes to employee contracts. Firstly, what it is you are actually trying to achieve.  Businesses often look to make changes to contracts when they are looking to reduce business costs, however it may be possible to improve efficiencies or cut costs elsewhere. Such measures are likely to be less disruptive.

 

Making changes to terms of employment can be highly disruptive. If employees are not supportive of the changes, then you risk a number of consequences. These can include damaging relations with your employees, legal action, discrimination, valued employees leaving, and strikes.

 

Our thoughts

 

At Lisa’s Law, we would always advise against practising fire and rehire, at all costs. It’s a practise which even in lawful scenarios is highly controversial and often leads to problems further down the line. Like Acas, we would always advise you to consult your employees regarding changing your employees’ contracts, as not doing so can cause friction with staff or people leaving.

 

If you would like any advice about any issues with changing staff contracts, please do not hesitate to contact us.

 

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