Code of Practice on Dismissal and Re-engagement

Issued by the Secretary of State under section 203 of the Trade Union and Labour Relations (Consolidation) Act 1992

Topics: England Union, English TUC, Trade Union, WEU, WEU Union, Workers of England, Workers of England Union

Posted by: admin 31/07/2024

Preamble

The legal framework within which this code will operate is explained in its text. While every effort has been made to ensure that explanations included in the code are accurate, only the courts can give authoritative interpretations of the law.

This code is issued under section 203 of the Trade Union and Labour Relations (Consolidation) Act 1992 (“the 1992 Act”). That section gives the Secretary of State a general power to issue codes of practice containing practical guidance for promoting the improvement of industrial relations. The Secretary of State considers that the practice of dismissing and re-engaging employees—sometimes referred to as “fire and rehire”—to change their terms and conditions can give rise to conflict between employers, employees and trade unions, potentially deteriorating industrial relations. This code provides practical guidance on avoiding, managing and resolving such conflict and disputes.

The code came into force on 18 July 2024.

Introduction

Purpose of Code

1. Employers must make economic decisions for the business’s benefit and set its strategic direction. This may occasionally lead to proposing changes to employees’ contracts of employment.

2. Contracts of employment—whether written or verbal—are legally binding and cannot usually be changed unilaterally. Changes typically require agreement by both employer and employee, or by their properly authorised trade union or other representatives.

3. If employees or their representatives do not agree to the proposed changes, an employer may, as a last resort, dismiss employees and then offer re-engagement (or engage other employees) in substantially the same roles to effect the changes. This is referred to as “dismissal and re-engagement.”

4. Dismissal and re-engagement can:

• create legal and reputational risks for the employer;
• harm employees’ interests;
• damage relationships, potentially leading to disengagement and industrial conflict.

5. This code ensures employers take all reasonable steps to explore alternatives and engage in meaningful consultation to reach an agreed outcome, and that they do not raise dismissal prospects unreasonably early or use threats to pressure employees.

Scope of Code

6. This code provides practical guidance where an employer:

• is considering changes to one or more employees’ contracts;
• envisages dismissal and re-engagement if agreement cannot be reached.

7. The code does not apply where the only reason for envisaged dismissal is redundancy under the Employment Rights Act 1996.

8. It applies regardless of the number of employees affected or the reasons for the proposed changes.

9. References to an employee’s contract or terms include all express or implied terms, whether written or verbal, including collective agreements and handbooks incorporated into the contract.

10. Legal obligations beyond this code may apply, but not all are covered here.

Legal Status – Effect of Code

11. Failure to follow the code does not, by itself, make a person or organisation liable to proceedings.

12. The code is admissible in evidence before a court, employment tribunal or the Central Arbitration Committee. Relevant provisions must be taken into account.

13. If an employment tribunal claim under Schedule A2 to the 1992 Act concerns a matter to which this code applies, the tribunal can:

• increase any award by up to 25% if the employer unreasonably failed to comply with the code;
• reduce any award by up to 25% if the employee unreasonably failed to comply with the code.

14. “Must” indicates a legal requirement; “should” indicates a recommendation intended to be admissible in evidence.

General Considerations for Information-Sharing and Consultation

15. Consultation is an ongoing process, not a single event. Even if the employer believes agreement is unlikely, it should consult in good faith for as long as reasonably possible to seek an agreed outcome.

16. Who to consult depends on the circumstances:

• Where there is a recognised trade union, consult that union.
• Where there is no recognised union, consult:
• any existing body of employee representatives;
• representatives chosen for this consultation;
• each employee individually.

The employer’s choice must be reasonable and comply with any legal obligations.

17. Ensure all potentially affected employees are informed and consulted, including those absent on sick leave or maternity, paternity or adoption leave.

18. Additional legal information-sharing and consultation obligations may apply, such as:

• prescribed information for collective consultation under the 1992 Act;
• obligations under any information and consultation agreement;
• obligations in transfers of employment;
• health and safety consultation obligations;
• consultation on pension scheme changes;
• prescribed information for collective bargaining with a recognised union.

19. Where a recognised trade union exists, the employer must not make direct offers on matters within the collective bargaining agreement before exhausting the agreed procedure.

Information to Be Provided by the Employer

When Information Should Be Provided

20. Provide information as early as reasonably possible to promote trust and enable meaningful consultation.

What Information Should Be Provided

21. Share as much information as reasonably possible to help employees and representatives understand the reasons for proposed changes and make counter-proposals. In particular, consider providing details on:

• the proposed changes and new or revised terms;
• who will be affected;
• business reasons;
• anticipated timings;
• other options considered;
• proposed next steps.

22. The amount of information depends on the circumstances. A business in crisis may have a shorter consultation period and less time for detail than one in settled times.

How Information Should Be Provided

23. Consider the type and style of communication to avoid excluding certain employees. Written communication is good practice.

After Information Is Provided

24. Employees and representatives will likely have questions. Always consider whether requested information can be provided, applying the same approach as when first sharing information.

25. If information is refused for confidentiality or commercial sensitivity, explain the reasons as fully as possible.

Consultation

26. Meaningful consultation requires open, good-faith engagement. Parties should genuinely consider proposals and alternatives.

27. The employer should be clear about objectives and proposals and genuinely consider reasonable alternatives to reach an agreed outcome.

28. Continue consulting for as long as reasonably possible to allow in-depth discussion, explore alternatives and increase the likelihood of agreement.

Raising the Prospect of Dismissal and Re-engagement

29. If the employer intends—if agreement cannot be reached—to dismiss and re-engage, it must be clear about that intention. However, raising the prospect too early or using threats as a negotiating tactic is detrimental to agreement.

30. The employer should contact Acas—the Advisory, Conciliation and Arbitration Service—for impartial advice before raising dismissal and re-engagement.

Re-examination by the Employer

31. If employees or representatives do not agree to proposed changes but the employer still needs to implement them, it should re-examine its proposals, taking into account feedback received so far.

32. Factors to consider include:

• the objectives;
• negative consequences such as reputational risks, damage to relationships, potential industrial action, loss of valued employees, legal claims and associated costs;
• whether proposals disproportionately impact certain employees (e.g. on protected characteristics under the Equality Act 2010);
• reasonable alternative ways to achieve objectives.

33. Revisit this analysis if circumstances change materially or consultations yield new information.

If Changes Are Agreed

34. If changes are agreed, communicate them in writing, clearly stating when they take effect and giving as much notice as reasonably practicable.

35. If any particulars covered by a written statement of employment particulars change, the employer must issue a written statement of change within one month of the new terms taking effect.

36. Even after agreement, invite feedback as employees adapt and consider mitigating any negative impacts.

Unilateral Imposition of New Terms

37. Where agreement cannot be reached, some employers may seek to impose terms unilaterally. Before doing so, consider the scope of any contractual clause permitting unilateral changes and its legal limitations.

38. If no contractual power exists, imposing changes will usually breach the contract and damage industrial relations.

39. Legal risks include:

• constructive unfair dismissal claims;
• refusal to work under new terms;
• working under protest and claims for breach of contract or wage shortfalls;
• working under new terms but claiming unfair dismissal;
• discrimination claims under the Equality Act 2010.

40. Continued work under protest creates legal uncertainty about acceptance of new terms. Employees should clearly state in writing which terms they do not accept.

41. Employers imposing terms unilaterally should still communicate changes in writing, comply with the written statement obligations and invite feedback to mitigate ongoing conflict.

Dismissal and Re-engagement

42. Dismissal and re-engagement should be a last resort after thorough information-sharing, consultation and genuine consideration of alternatives.

43. For a dismissal to be fair, the employer must have:

• a potentially fair reason for dismissal;
• acted reasonably in treating that reason as sufficient;
• followed a fair dismissal procedure.

44. Give as much notice as reasonably practicable, complying with the greater of contractual or statutory notice periods.

45. Consider giving employees extra time to make personal arrangements (e.g. childcare, travel) and practical support such as relocation assistance, career coaching or counselling.

46. The employer may commit to reviewing changes at a fixed future date or introduce changes on a phased basis.

47. Set out new terms in writing and comply with written statement obligations, ensuring only the consulted terms are changed.

48. Re-engage employees as soon as reasonably practicable and invite feedback to mitigate negative impacts and reduce the likelihood of renewed conflict.