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Should fire and rehire be illegal?

View profile for Paul Burton
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Should fire and rehire be illegal?

Paul Burton looks at an increasingly prevalent issue in employment: fire and rehire.

He considers the issues that the practice causes for employees; and discusses the legal risks that could arise for employers.

Two recent announcements have indicated that employment levels are still rising and, separately, that a relatively low number of businesses are now planning redundancies.

Yet, due to the pandemic, this has been far from expected. Below is a possible explanation for this.

What is fire and rehire?

One theory is that workers are retaining their employment only by accepting less favourable terms in exchange for avoiding redundancies. This process has become known as “fire and rehire”; re-engagement of an employee immediately on new terms.

According to recent research, nearly 1 in 10 workers have been asked to reapply for their jobs since the start of lockdown.

Is fire and rehire legal?

Fire and rehire is not illegal but it does require employers to go through a lengthy consultation process which often involves engagement with trade unions where these are recognised and taking notice periods to avoid claims of unfair dismissal or, in the case of incorrect notice, potential wrongful dismissal.

Will fire and rehire become illegal?

ACAS issued a lengthy report on the topic in June of this year amongst calls by various political parties to ban the practice in law.

What issues can fire and rehire cause for employees?

Employees can often feel forced into detrimental changes knowing the alternative is a loss of their job. Most problematic in law is that the process of fire and rehire regularly ‘resets’ the continuous service back to zero.

This can have serious consequences for employees who then have minimal employment rights for the next two years and may lose highly valuable redundancy payments.

What are the alternatives to fire and rehire?

The alternative to fire and rehire is for an employer to simply serve notice on their employees of a change in terms and seek to impose them unilaterally. There are significant legal risks using this approach including breaches of contract and constructive unfair dismissal.

A specialist employment solicitor’s view

Employment Partner Paul Burton says: “Fire and rehire as a practice can come with considerable risk for employers who get it wrong. Employees should be consulted and not feel under any undue pressure to accept the change in terms.

Although it is recognised that employers will need to explain that the change in terms is necessary for a financial reason and may explain that the risk of not accepting is unavoidable redundancies, an employee who believes they were ‘forced’ into accepting may still have a claim.

The pandemic has given businesses an opportunity to explore alternative methods and ways of working which many were reluctant to consider even twelve months ago.

As with redundancies, substantial changes in terms and conditions of employment should be towards the end of your list of options and there is much to be said for creative alternatives.”

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