‘Fire and rehire’ – why you should avoid it, and how you should approach it if no other options are available

Employers sometimes need to change the terms and conditions of their employees.

This could be a change to working hours, salary, benefits, or location.

Employers should seek to reach an agreement with employees either through individual or collective consultation.

However, in exceptional circumstances, where there is a genuine business case and an agreement cannot be reached, employers can sometimes justify unilaterally changing employees’ contractual terms by ending their contracts and re-hiring them on new terms and conditions.

‘Fire and rehire’ is not a new practice but it appears to be on the rise as many, if not most employers face challenges of operational disruption, loss of revenue, supply chains and reduced productivity – to name a few – as a result of the pandemic. A survey of workers by the Trades Union Congress in November 2021 found that 9% of workers had been told to reapply for their jobs on worse terms and conditions since March 2020.

What are the risks for employers using ‘fire and rehire’ practices?

‘Fire and rehire’ should be considered as an absolute last resort, where changes to employment terms and conditions are vital and only after meaningful consultation has taken place. The risks of using the practice include:

• High risk of legal claims from employees who feel they have been unfairly dismissed or discriminated against, a breach of contract or constructive dismissal
• Reputational damage
• Adverse effect on working relations
• Increased levels of absence
• Loss of productivity and commitment if employees do not support the changes, or the way the changes have been pushed through
• Strikes and other industrial action

How to make changes to employment contracts

The business case & initial announcement

You need to have a considered business case which sets out the reasons why you propose to make the changes, even if this seems obvious. You may have been considering these changes for some time, however this may be the first time the employees hear it, so you need to explain your reasoning for a proposed change. You must provide relevant information about the proposed changes so employees can understand and reach an informed view about them.

Seek agreement

Depending on the type of change you are proposing to make and how well your sales pitch goes, you may get agreement from some, if not all, without having to go through a formal consultation process. You should follow up your conversation or announcement in writing and ask the affected employees to consider the changes and whether they are happy to accept them within a certain timeframe and deadline. Any changes need to be confirmed and agreed in writing by the employer and employee.

What to do if an agreement cannot be reached

If the individual(s) will not consent to the change to the contract, there is a decision to be made by you. You either allow the employee to continue with their current terms and conditions or you look at formal consultation.

The formal consultation process

You will have already outlined your business case in the informal stages and briefed your employees in your initial announcement or individual meetings. You will now be inviting the employee to a consultation meeting to discuss this on a 1-2-1 basis, with a view to reaching an agreement. At this point other options can be considered too – listen carefully to any suggestions made by the employee and take their points seriously.

You will need to send a letter inviting them to the meeting and you may wish to allow the right to be accompanied. During this process, you should set a deadline for obtaining written agreement to the change and warn employees that, if agreement cannot be reached by the deadline, you may need to serve notice of termination of current contracts, and immediately offering re-engagement on revised terms.  You will need to ensure that you make notes of the meeting and the employee is sent a copy to confirm that the notes are an accurate record.

Keep consulting, try to reach an agreement or compromise.

If an agreement still cannot be reached, send written notice of termination of employment to the employees, identifying the reason for dismissal (likely to be ‘some other substantial reason’ SOSR) and the effective date of termination. The notice you give of the termination will be the employee’s normal contractual notice period. Bear in mind that this may differ from one employee to another if there are differing lengths of service. Include an offer of employment on revised terms and state that the new terms will be effective on expiry of the notice period, subject to the employee accepting the new terms by a specified date.

It’s important to consider that this would still be a dismissal and so you must:

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

If you are proposing to dismiss and re-engage 20 or more employees, by law you must also collectively consult on the dismissals.

Numbers Affected & Timescales

More than 20 employees

If there are over 20 individuals affected then you must follow collective consultation obligations, and elect employee representatives. You may have to consult with Union representatives if employees are members of a recognised trade union. There are minimum consultation period requirements, if a possible outcome might be dismissing and re-engaging 20 or more in a 90-day period. The minimum period of consultation for 20-99 dismissals is 30 days and 45 days for 100+ employees until the first dismissal/re-engagement can take place.

Fewer than 20 employees

If there are fewer than 20 individuals affected there are no minimum consultation timescales however the consultation meeting should be meaningful, and you should listen to their concerns with a view to seeking agreement. Trying to get a change through in a week, for example, could be unrealistic and unreasonable.

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