In principle, the above can be carried out by an employer if they can justify that they followed a fair and reasonable procedure of meaningful consultations with the staff affected to justify the business rationale of why the changes are required in circumstances where there are no other alternatives.
In November 2021, Acas (the Advisory, Conciliation and Arbitration Service) published guidance for employers considering making such changes, suggesting that fire and rehire be a last resort option for employers after first having made all reasonable attempts to reach agreement through full consultation.
The process is not without risks, especially if not followed correctly, like when back in March 2022, P&O Ferries carried out mass redundancies without following due process, with the consequences being that the Government announced its intention to introduce a new Statutory Code of Practice on the use of 'fire and rehire' practises so to act "as a deterrent, particularly to those employers seeking to use the threat of fire and rehire as a negotiation tactic"(2).
However, it is unclear when the Code of Practice will be published by the government as it would need to be approved by Parliament. When it becomes the law, tribunals and the courts must take account of the code to ensure that the strict legal obligations within the code have been complied with.
Until there is further information on the code, we have a recent Court of Appeal decision that gives guidance on the firing and rehiring process, namely the case of USDAW and others v Tesco Stores Ltd, where Tesco was seeking to remove a retained pay benefit from their employees and pay instead a lump sum to secure their agreement to the change. The retained pay benefit had been awarded previously following business reorganisation as a relocation incentive and as an alternative to redundancy. Staff regarded the retained benefit as "guaranteed for life".
Tesco explained to the staff affected that it would dismiss and re-engage any staff who refused the offer. The trade union USDAW successfully applied to the High Court seeking an injunction to prevent Tesco from terminating affected staff contracts. Tesco appealed to the Court of Appeal.
Is it considered to be unfair dismissal, when an employee doesn’t agree to changes in employment contract?
The Court of Appeal overturned the High Court decision, holding that by applying the objective bystander test, it could not be implied that the retained benefit would last indefinitely, thus Tesco could give notice in the normal way to end the contract and remove the retained pay benefit.
No protection from termination of contract could be implied in these circumstances. Therefore, granting an injunction to stop the dismissals was not an appropriate remedy, as the Court of Appeal was unaware of any other case where a court had granted an injunction to permanently stop a private sector employer dismissing an employee where the employee's remedy for such a breach of contract would be likely to be damages for financial losses.
Although the Court of Appeal's decision is helpful to employers, changes to employment contracts can be complex and proper procedures need to be adhered to avoid unfair dismissal claims and breach of contract claims, in particular, making sure not to offer promises to employees about the permanence of changes to terms and conditions if there is a chance of the need for some flexibility in the future.
The article is for general information purposes only and should you require any further assistance on the matter, please do not hesitate to call our advice-line team on 0116 274 9193.
