Abolition Of Fire and Rehire: You Should Be Afraid
We wrote recently about the most well-known measure in the Employment Rights Bill: unfair dismissal becoming a day one right. Another new right under the Employment Rights Bill which, on the face of it, seems relatively innocuous for most SMEs, could actually be far more onerous if enacted in its current draft: the abolition of fire and rehire. This is likely to come into effect before the end of 2025.
An employer cannot make substantial modifications to a contract of employment without the employees’ consent. When no consent is obtained, some employers choose to dismiss the refusing employees and offer them re-engagement under the new terms. Alternatively, they may want to hire new employees in substantially the same roles under these new terms.
The practice came under media scrutiny during the pandemic when companies such as BA or Tesco imposed substantially less advantageous terms on their staff.
At the moment, these dismissals may, depending on how you go about them, be deemed to be fair. Further even a tribunal found the dismissals to be unfair, if the employee refuses a role with similar remuneration and benefits, the employer will often be in a position to successfully argue that the tribunal should reduce the compensation for unfair dismissal to the basic award, which is the equivalent of the redundancy pay.
Employment Rights Bill
If the Employment Rights Bill passes unchanged, it will be automatically unfair to dismiss an employee who refuses to accept any changes to their contract of employment or to dismiss an employee to enable the employer to employ another person to carry out substantially the same duties, or to re-engage the same employee under substantially the same contract.
Under the current draft of the Bill, employers will be able to use one narrow specific defence against this type of claim. The employer will be able to avoid a finding of unfair dismissal if it can show:
- The reason for the variation of the contract was to eliminate, prevent or significantly reduce, or significantly mitigate the effect of, any financial difficulties which, at the time of the dismissal, were affecting, or were likely in the immediate future to affect, the employer’s ability to carry on the business as a going concern or otherwise to carry on the activities constituting the business (see below in respect of public sector entities who do not operate on a going-concern basis), and
- In all the circumstances, the employer could not reasonably have avoided the need to make the variation.
Let’s take an example in plain English: you are a security firm and provide security staff to a client between 7.00 am and 7.00 pm with 30 minutes for lunch. The client asks you to increase the hours to between 6.00 am and 10.00 pm. Your contracts of employment state that the hours of work are between 7.00 am and 7.00 pm four days per week. Under the new legislation, you will not be able to dismiss employees who object to a change to their working hours, or dismiss them and reemploy them under a new contract, or dismiss them and employ other employees under the new terms.
You will not be able to avoid a finding of automatic unfair dismissal even if you can show that you will eventually lose the client if you cannot comply with their request for increased hours. In order to meet the criteria as currently drafted you would need to show that you are on the verge of bankruptcy and the change to the contracts will significantly reduce that risk of bankruptcy.
There are lots of employment law experts commenting on this at the moment and we invite you to follow the blog of Darren Newman on the issue if you want a detailed analysis of the bill.
A solution?
Whilst waiting for the final version of the Bill, we encourage all employers to review their contracts of employment promptly before the Bill becomes law.
Many clauses of a contract of employment do not need to be modified if they contain flexibility within them. A blanket clause reserving the right of the employer to make modifications to the contract of employment won’t work, but specific clauses providing flexibility are more likely to be enforceable.
Let’s return to our example. If instead of stating “your hours of work are between 7.00 am and 7.00 pm four days per week with 30 minutes for lunch” your contract states “your current hours of work are 7.00 am and 7.00 pm four days per week with 30 minutes for lunch, however, the Company reserves the right to change the days and hours of work you will be required to work provided that your overall hours of work remain 37.5 hours”, you will not need to modify your contract of employment.
This flexibility could be relevant to your place of work, your bonus scheme, your benefits, etc…
There is no guarantee that such a clause would be enforceable, as the principle is that the variation needs to be reasonable and reasonably exercised. However, in your negotiations with your staff or your staff representatives you will have more bargaining power.
We offer a free contract of employment review.
For more specific information or to discuss your requirements please call either Amanda Galashan or Julie Calleux at Employease on 03339398741, or email us at info@employease.co.uk. This note does not constitute legal advice on any particular situation you may have.
Copyright: Employease 2025
