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Natalie Wood
Natalie Wood,
SOLICITOR
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Amending contracts of employment…Is fire and rehire the best approach?
10 June 2021

Co-authored by Natalie Wood and Emma O'Connor

Changing terms and conditions of employment is a tricky business. Whether it’s furlough, reduced hours or pay, this last year has put contracts in the spotlight. Getting employee consent is by far the least risky way of amending terms and conditions…but in the absence of their consent, are other options available?

Natalie Wood, Solicitor and Emma O’Connor, Director, explain and also ask how managers can handle these essential conversations and consider Acas’ report, published yesterday on employer’s use of fire and rehire.

Changing terms and conditions of employment is a tricky business. Recently, some employers have had to embark on the process to place employees on furlough or reduce hours and pay. Getting employee consent is by far the least risky way of amending terms and conditions…but in the absence of their consent; there are other options (at least for now). 

How terms are changed will depend on the term the employer wants to change – is it something fundamental like pay, hours or location or something trivial? Who says something is trivial? What might be trivial to an employer might be vital to an employee.  A slight change to a working pattern or location, for example, could have a big impact on the employee and could render the role unrecognisable. In some cases a contract change can lead to original roles being redundant. Can an employer rely on silence as acceptance of a change? Does a change mean our original “deal” has altered?

Options

Sometimes a contract/clause will have to change because the law has changed. A classic example was when statutory minimum holiday changed. A statutory change will override what is in the contract, unless the contract/benefit offered by the employer is more generous. Employers cannot go below the minimum statutory terms.

Over time, terms can adapt and change as roles or businesses develop. Terms might change over time by way of custom and practice. In some cases, contracts or certain clauses may be drafted with an element of flexibility. Employers may have “reserved the right” to make changes to certain terms perhaps temporarily or permanently. Whilst there may be an element of flexibility, employers seeking to rely on their unilateral right to amend terms should do so cautiously. The extent to making amends would only be possible if such a provision exists in the employment contract/clause and even then any change would have to be reasonable and not change the role fundamentally. Some form of notice and seeking feedback/questions is also a good idea. For example, it would be rare for an employee not to accept a pay rise, but we ask employees to sign to agree to their new salary as best practice. Evidence is always preferable.

Sometimes a change to a contract might also need “consideration”, particularly, if you are asking an employee to agree to a new deal from the one their first made with you.  So be careful when looking at business protection clauses or notice periods and take advice.

Another option – and the subject to recent focus – has been, where an employer has sought to change terms and conditions, has consulted with staff (and any union) but some employees do not agree to the change – what then? Some employers might allow employees to continue to work on their old terms and simply change contracts for new staff.  This could give rise to arguments of equal pay as well as the administrative headache of having staff on different terms. There might be other concerns such as a TUPE transfer which could impact on a new employer’s ability to change terms – so do take advice. 

Another option is after consultation, refusing employees are given notice under their current contract and are subsequently offered re-engagement on new terms immediately after notice expires… the so called ‘fire and rehire’. 

Employees of course still need to agree to be rehired, but in doing so they accept new employment terms, which may be less favourable than their previous ones. British Gas provided a recent example of this when it fired and rehired thousands of staff, providing them with new terms on re-engagement which required them to work more hours (including weekend and bank holiday shifts) on less favourable payment terms.

Caution should be applied however; as employers will still need to ensure that they have followed a fair dismissal procedure prior to “firing”, given the employee their statutory or contractual notice entitlement (if applicable) and given them opportunity to appeal their dismissal. In some circumstances employers may also need to consider and adhere to a collective consultation process. By failing to do one or more of these things, employers may end face claims for unfair dismissal, wrongful dismissal or be required to pay employees a protective award.

Fire and rehire: a change in the law?

The practice is not universally supported and employers should therefore be mindful of reputational risks as well as legal. In summer last year for example, British Airways for example was criticised by the Transport Committee for its plans to fire and rehire some of its employees. British Gas also faced the heat in respect of it use of the tactic, with British Gas boss, Chris O’Shea being called to parliament to shed light on the move. Recently Weetabix has hit the headlines too.

There has been some further parliamentary criticism of this tactic, with Boris Johnson branding it as ‘unacceptable’. Gavin Newlands, MP, has also submitted Private Members Bills with the aim of reforming the law to make it illegal to fire someone where the purpose of their termination is to rehire them on less favourable terms. Although the progress of the Private Members Bills has seemingly stalled, the Government has indicated that it does plan to legislate around the practice of firing and rehiring. In February last year it commissioned Acas to conduct a review of the tactic, a report which Acas published yesterday (8 June 2021). 

The report does not offer much additional direction at this stage, instead pointing at suggested legislative options (e.g. tightening up the law around unfair dismissal and protecting continuity of employment in fire and rehire scenario) and suggested non-legislative options (e.g. publishing ‘name and shame’ data on employers that fire and rehire) that were put forward by participants of Acas’ fact finding exercise. The CIPD has also indicated that is willing to explore the use of fire and rehire as a means of amending terms of employment. Suffice to say, it is likely that we will see further developments in this area. 

Handling Essential Employee Conversations – Virtual Training Course 1 July 2021, 0930-1100

Crucial, difficult, courageous – however we term them, conversations such as amending contracts are essential. Book your place on our upcoming 90 minute Handling Essential Employee Conversations course on 1 July 2021, led by Performance Psychologist Dr Jonathan Smith. Learn the tips and techniques to be better equipped to run, lead and manage those conversations we all put to the bottom of the list!  Booking link HERE.

Summary

The business of firing and rehiring employees requires careful thought and planning. It is not without legal risk and legal advice should be sought. Whilst employers are currently able to terminate and re-engage employees, it remains to be seen to what extent or for how much longer employers will be able to do this. Far better to manage such discussions fairly, effectively, openly and with the consent of your employees. For help and advice on changing or reviewing your contracts of employment contact us HERE.

Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.

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