July 4, 2021

During the course of the COVID-19 pandemic there has been widespread condemnation of ‘fire and rehire’ tactics by a number of large employers, including British Gas and British Airways. Fire and rehire involves employers dismissing staff and re-employing them on different (usually worse) terms and conditions or holding out the prospect of doing so as a negotiation tactic to obtain workers’ agreement to contractual changes. The practice is not new but tends only to hit the headlines when there is a recession. However, fire and rehire also crops up when times are good, with employers adopting it in exercises such as cost-cutting, workplace relocations, changing shift patterns, and streamlining terms and conditions. Although the practice has long been regarded by many as unacceptable – sometimes even in cases of last resort – the reaction of the public and politicians across the political spectrum during the current crisis is more concerned than in previous times. A recent poll conducted on behalf of the GMB trade union found that 76% of those questioned think that fire and rehire should be outlawed – including 71% of Conservative voters – with 67% suggesting that they would avoid buying goods or services from companies that use this strategy.

Scale of the practice not known

The clamour around fire and rehire led the Department for Business, Energy and Industrial Strategy (BEIS) to ask Acas
last year to gather evidence and produce a report, to help BEIS inform its policy thinking on this issue. Acas spoke to representatives from ten stakeholders, including employer bodies; trade unions; employment lawyers, accountants, HR and payroll services; academics; and Acas senior advisers. The report, published this June, does not contain recommendations; rather, it is qualitative in nature, exploring the experiences and views of those interviewed. Perhaps most striking is how little is known about the extent of fire and rehire over the last 30 or so years; Acas could not point to any large-scale surveys or quantitative data on the prevalence or trends of the practice. There was a shared sense among some of the stakeholders that fire and rehire has been becoming increasingly prevalent in recent years, in a trend pre-dating the pandemic. Others, including trade unions and employer advisers, fed back that they had seen a growth in enquiries and/or use of the practice post-March 2020. A recurring theme across participants was the use of fire and rehire in the context of longer standing negotiations that are now being revisited during the pandemic.

The best indicator of the extent of fire and rehire during the pandemic is contained in two polls identified by Acas. One, by the TUC, found that nearly 1 in 10 (9%) workers in England and Wales had been told to reapply for their jobs on worse terms and conditions since the first lockdown in March 2020. The other poll, conducted by the CIPD, reported that 3% of respondents said that changes had been made through dismissing and re-engaging staff, with 34% stating that they had made changes to employees’ terms and conditions ‘through consultation, negotiation and voluntary agreement’. As Acas points out, it is possible that some of these changes may have been achieved by holding out the prospect of fire and rehire during the consultation and negotiation process, but, if so, the extent is not clear. An academic or government study is clearly overdue.

The legal framework reflects the fundamental fact that employers have a right to manage their businesses, subject to some restraints. As we explained in a feature in Brief 1128, fire and rehire is not without risks, but there will be situations, where obtaining agreement from staff to changes is not possible, sometimes not even when the deal on offer has been recommended by a trade union. Provided an employer has a sound business reason, gives the required period of notice of termination, and acts fairly and in a non-discriminatory way, it should be
able to defend any claims. The question BEIS is trying to address is whether the current balance of protections between employers and employees is right. The case for reform is strong because the protections and remedies ultimately do little to disincentivise employers from using fire and rehire tactics in situations that are arguably inappropriate, such as streamlining contracts of employment, and in ways that undermine legal rights – for example, to break continuity of service. But, as the Acas report reveals, legislating to ban or curb fire and hire
is not a straightforward matter. For instance, a ban might simply result in more dismissals, leaving staff in a worse position. Curbing the use of the practice would mean that BEIS would need to identify situations when fire and rehire would be deemed lawful.

Possible interventions

While fire and rehire is not particularly palatable, it is probably unrealistic to reserve it as an option of last resort, such as where a business is at risk of insolvency. To do so would shackle the ability of employers to react to changes in the market and customer needs, and many employers would argue that fire and rehire is sometimes the only way
to break an impasse in negotiations over necessary changes to terms and conditions. The participants in the Acas study put forward a number of options for reform, but most of them may not be workable in practice. Some of the more realistic suggestions include allowing fire and rehire, but penalising employers who raise the possibility of its use as a negotiating tactic at an early stage, protecting continuity of employment in fire and rehire scenarios, and beefing up consultation requirements.

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