One of the new measures set to be introduced by the Employment Rights Bill is essentially a ban on dismissing an employee for refusing to agree to a variation of their contract, sometimes known as ‘fire and rehire’.
The new provisions in the Employment Rights Bill provide that if employment is terminated on this basis, it will be automatically unfair. This will apply where the reason (or principal reason) for dismissal is either that the employee refused to agree to a variation of their contract or where they were dismissed to enable the employer to recruit another person (or rehire the existing employee) under new terms but with substantially the same duties.
There is a potential exception if the employer is in a very difficult financial situation and varying the employee’s contract is essential to prevent the business collapsing, so this will only be available in very limited circumstances. For it to apply there are also a number of matters that must be considered prior to dismissal, including the degree of consultation that has taken place with the affected employee and whether the employer had offered anything in return for them agreeing to the variation.
It is not yet clear when these new rights will come into effect, but it is proposed that the Government will launch a consultation on the compensation that would be payable in the event that a claim for unfair dismissal on the grounds of fire and rehire is successful, so it may not be until this consultation has taken place.
Under the current law an employer is simply required to show a good business reason as to why the change in terms was necessary and to have acted as another reasonable employer would have done. Only a few months ago, in July 2024 a new Code of Practice on fire and rehire practices was introduced, and it is not yet clear what will happen to that. It may be added to or repealed altogether, we will have to wait and see. The proposed new law goes far beyond the current measures in place, and even further than was outlined in Labour’s Plan to Make Work Pay which just committed to reforming the law to provide “effective remedies against abuse.”
It is likely to be very unpopular with employers as it effectively means that they will be stuck with the terms that they agreed with the employee at the outset of their employment, and employees are likely to become increasingly resistant to any change knowing that they have enhanced protection.
If you have any questions about the Employment Rights Bill and how it may affect you please contact our Employment Team on on 0345 646 0406 or complete an online enquiry form, and a member of the team will be in touch.