A number of high profile companies, including British Airways and Centrica, have recently attempted to push through changes to employees’ contracts through so-called “fire and re-hire” exercises, technically known as dismissal and reengagement. The trade unions involved have strongly resisted this approach, successfully so in the case of British Airways, with UNITE claiming a significant victory.
As you might expect, Keir Starmer has given his backing to the unions in these cases. More surprisingly, however, he has gone further than this and publically declared a commitment to introduce legislation abolishing the practice of fire and re-hire altogether. Given that this practice has been in place for many years and is widely used by employers, this would represent a very significant change to the law.
So why is fire and re-hire controversial, and what do employers need to consider if planning to go down this route? This and other related issues are discussed in our webinar.
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Webinar transcript
(Please note this is auto-generated and un-edited)
Thank you very much for joining this webinar on five, every hiring, the controversy and the law. My name's Matt McDonald on the partner, May point to shake them up tonight based and all Birmingham office. And I'm joined by my colleague, Helen, Hughes Legal Director in the team. And she's based upon even office. So, just quickly, what we're going to run through today. We're gonna look at the basics of farming and rehiring and why companies do it. Why it's controversial.
0:39
and Helen is gonna look at, actually what employers need to consider when they're planning on going through this process. And then, we'll look at the risks, as well, on both the legal risks. And also, we'll touch on some of the non legal risks. So, why companies following me? Hi. Well, let's start from the basics. Fire me how it's a relatively new term for years has been more commonly known as dismissing the re-engagement. But, I guess, fire me, how are you a bit more bike friendly? So that seems to have come to the fore. Certainly, since the pandemic started, but if you're wondering, then, this is exactly the same thing, as dismissive May. Engagement is just different term for it and essentially arises when an employer wants to make changes, to judge conditions of some, or all of its employees. It's essentially a mechanism.
1:23
It's intended to allow the employer to do, in the safest way, possible, is often used as an alternative to making redundancies, but not always. So you might, for example, get situations where, when I came across recently, a client operating a call center, didn't operate weekends, but we're getting increasing complaints from customers about the fact that there wasn't any one available. The weekend said he needed to open every weekend and of course, that then necessitate to changing the working hours of the workforce based in the call center. So there's no suggestion of urgent situation in that circumstance, but it was a situation where they needed to try and force thracian changes. But very often it is to do with redundancies. And very often there's a cost saving element which is why this has become such a more more use than often than it normally is during the last year or so in light of all the troubles caused by the pandemic. So why is it?
2:16
Controversial, as I mentioned, it's often an alternative to redundancy and essentially a better alternative, I'll say, we'd rather make these changes and then make redundancies. So in that sense, you would think it ought not to be controversial particularly during a pandemic when saving businesses are struggling. And of course, this isn't a new practice. I've said, it's been around for the 14 years, or so I've been practicing it. It's not a new concept, and businesses have been doing it for years, and years and years. So why is it suddenly?
2:47
Controversial, whether it is, probably partly just because it's being so widely used at the moment, and is therefore more in the public eye.
2:55
You can see the results of the key strategies, that survey, which is found that, and this is just since kind of lockdown hitting. People are forced to work.
3:06
And all of the restrictions came in last year, nearly 10% of the workforce, and this is across the whole country, at least as far as the survey was. Concerned, 10% of those surveyed had been through this process. That's a heck of a lot of people on way, way up from what you would normally expect to see.
3:22
Nearly a quarter of the workforce being asked effectively to downgrade in terms whether that's low pay lower hours, whatever it may be. So it is just very widespread alignment, and therefore, very much in the public eye, there's been huge opposition from trade unions and jet both January on in some specific cases. So you might call it a bit. In the case of day, that. You need to successful BA, back down on the Commons to force, through changes to their stocks, which is given at SBA, and the problems facing the airline industry as pumps.
3:57
Quite surprising, that also center, cannot hold particularly the news at the moment. And I've got a tweet here from ... saying the whole labor movement stands in solidarity with British Gas, what is the defending themselves against the shameful practiced? By Rehire? British Gas must abandon this practice, and the government must outlaw rates. So, castile Morays re focused on this effectively saying that if you get into power, they would on the whole practice of rehab which is pretty surprising an extreme position to take. But that's what we say. So, again, this is all white it's particularly controversial at the moment.
4:32
And ultimately, I think there's a feeling not in every case but in a lot of cases that perhaps the pandemic is being used as a smokescreen by employers who've wanted to push through negative changes to employees contracts for a long time and they feel like they can use the pandemic as you know the perfect excuse for doing it. Don't know. I'm not saying that's the case. I don't know. It might be in some circumstances.
4:55
But, there's certainly a feeling that some employers rather unfairly relying on Nixon and using it for nefarious purposes, if I can put it that way.
5:06
I think, Helen, over to you to cover the next few slides.
5:11
Firstly. Good morning, everyone. Good to be here.
5:15
I think what do you need to consider? Well, well firstly we need to tread cautiously and be careful that the very first thing to look at is can actually, you, you make these changes. It is it even going to be an issue. So, some minor matters, you might be able to change without employees, agreements.
5:33
So if we're talking about non contractual policies, for example, but most, most things can't be, so then you need to, you need to look at the employee's contract of employment for start to see whether there were any terms within that contract will, which will allow you to make the change. Now, there's a number of those, sort of contractual terms that could be relevant here, so you might be able to interpret the relevant term in question, quite broadly, in case that will let you make the change that you want.
6:06
So for example, you might be able to interpret a job title, Give us a wide interpretation or job description. As isn't that, you could look to see whether you've got what's called a specific flexibility. So effectively, that's just an express right to change in terms of the usual ones that we see around that, Mobility Clauses, which allow you to change an employee's place of work. And other than that. And these tend to be at the end of the, the end of the contract, There might be what's called a general flexibility clause, which gives you a general power to.
6:45
To very now, obviously, you know, that may be good news if you've got one of those type of clauses, because in theory, that would give you the contractual right, to make the change. But, as I said, you need to tread cautiously because it's not carte blanche to, you know, increase hours or reduce pay. Those type of clauses are very much interpreted narrowly by trying to you know, should, should you have to get that far. So if you've looked at all and actually, the changes that you're proposing to make aren't going to be authorized by the contract will then what most eruptions. And this three basically move run through each of them, But just to summarize. So you might be able to get employee consent.
7:33
If not, you might be able to unilaterally impose the change to the last alternative. This is matters. I've been referring to this dismiss limb, Re-engagement, this fire re hire scenario.
7:46
Now, the latter two, certainly have risks attached to those, which will, which we will take a look at, but firstly, looking at employee consent quite. Obviously, that's going to be the easiest, and most straightforward, and least risky option if you can actually get the employees to buy to buy into that and to agree to it.
8:09
Changing an employee's contract without their consent will be a breach of contract and give rise to a number of claims that an employee could bring including resigning, claiming constructive dismissal, or alternatively, staying put, objecting to the changes.
8:27
And working into what we call protest, which isn't, isn't easy then for an employer to have to deal with that. So, as I said, you can get employee consent. That's the best outcome. We'd always advise.
8:41
get that in writing, so there's gonna be no ambiguity over what has been consented to and I think you need to think carefully about how do you get that consent or what.
8:53
What you can do as an employer. In terms of explaining the changes. Explaining the business position, and the reason for why you're needing to make those changes. So that employees can kinda understand what you're trying to do, and hopefully buy into that.
9:09
Um, the more likely you, we've seen this over the last year. employee is more likely to agree. If they can understand the rationale.
9:18
Fool that we've seen, quite a number of clients, who've actually been able to introduce changes, that, in ordinary times, they probably wouldn't have been, that employees have been a little bit more understanding during the, during the pandemic. So, effectively, in terms of getting employee consent, what I'm saying is communication is key.
9:35
You might need to consider whether you can offer incentives to encourage that consent, they don't necessarily have to be financial, there might be other things that you can you can talk about we'll try and offer.
9:48
An equally, particularly relevant during the pandemic is whether you can time limit the change or agree to review it in a set period when you're hopeful that perhaps the business might've. Might have recovered sufficiently. For example, if you talking about reduction in PAG working hours.
10:06
So if you can't get consent, we've obviously got a failure, to reach agreement, so what's the next option? Well, some employers might consider imposing the changes unilaterally. Now that's the employers do that in the hope that the employees will just that they might not like it but now just carry on working. And after a while you can say, well, we've got we've got deemed consent effectively because they've just carried on that. That's quite a risky approach because what tends to happen if employees are sufficiently aggrieved is that they will work under protest. So they'll make it very clear to you that that they don't agree to the change, they're working under protest and that effectively reserves the right to bring proceedings.
10:55
The breach of contract in court were ultimately resigning claim constructive dismissal or potentially bring unlawful deductions from wages claims if the changes have had to have a financial impact on them.
11:10
The second option is what, what, what we were talking about earlier with map, the foreign rehire option.
11:16
So you you're terminating contracts and employment by giving the correct period of notice, but you're referring to re-engage the employees on the new terms will always say it is, you know, very much a last resort is even though it will give you certainty as an employer because you've effectively terminated the old contract blue flag.
11:38
And recruited on the new terms there are still a number of claims that can arise from that effectively.
11:44
There's been a dismissal if you think about it, because you've terminated the contract, and employees with sufficient service can consider bringing unfair dismissal and dismissal claims. Matt's gonna talk in a little while about, Well, what's the reason for dismissal would look like? Should you get to tribunal proceedings?
12:03
And that's called some of this stone to reason this SOS are, but you also need to make sure that you're following a fair procedure in dealing with this. This route is the option. And also, you've got to bear in mind, collective Redundancy consultation, which might seem slightly odd, because we've said we're not necessarily talking about redundancy situation.
12:25
But if we move on to the next slide, you will see that Section hundred and 88 talks about the fact that if you're proposing to Dismisses redundant 20 or more employees then you have to go through the collective redundancy route. Now we're all familiar with that when we are making employees redundant.
12:46
If we're making more than 20, we know that we have to consult with trade union representatives or employee representatives, but the definition under this legislation has a wider meaning, and it actually relates to this situation.
13:02
So, this kind of foreign rehire, if you're looking at firing more than 20 people, then you will have day deal with collective collective consultation, which obviously has a timeline involved. And potentially can slow the process down slightly. But if you don't do that, you can see on the slide, is quite heavy penalty for employers, 90 days pay per employee for not, for not dealing with that.
13:34
You also, if you are going to collectively consult, if there's more than 20 employees who might be affected, then you also have to notify the Secretary of State on form H R one. Otherwise, that's potentially a criminal offense for failing to do that.
13:51
So, if we move on to the next slide, very good, very good question, What you need to consider?
13:58
Well, the most difficult thing, when you're starting off on this kind of route, is to know whether or not the employees are going to agree To the changes, or reject them, because, if they are going to reject them, potentially, you're going to have to go down the foreign rehired route, and potentially, then, collectively, Consult.
14:17
So I think you've got to evaluate very carefully at the outset what what the changes are, how likely you think it is that they are going to be controversial, and that employees aren't going to consent.
14:32
And then sort of using that, make an informed decision, basically as to how you're going to run your process, and whether you need to build in time to go through that collective consultation piece, if in any doubt.
14:46
And it may be that you want to test the water with 1 or 2 sorts of warm employees as it were, but if in any doubt, it is probably going to be prudent to assume that you might have to foreign rehire and start consultation at the outset. Quick mention of a case involving Mastership County Council, where they they didn't do that. They left it fairly late in the day. I get the point at which they were going to actually they've made a decision that they would dismiss, re-engage.
15:14
And the tribunal said that was too late. You need to look back when you're proposing when it's a proposal.
15:20
This could be to say, OK, so I'm not going to talk us through what the risks are like color Soviet. But broadly speaking, the main risk areas is unfair dismissal.
15:35
So, as Helen mentioned, the risk going today, dismissal Arabic, the re hire element of the fiery hires. Of course, what, you talk about, those making an offer to someone, new terms. But, in 90% plus, if not 99% plus of cases, the alpha will get rejected because it was going to be accepted. In Virginia. You've been accepted by the individual at some point, during that consultation process. Just occasionally when it really comes to the crunch. Someone realizes backs down, but more often than not. They've already set out, I stole at that point. They'll reject. the offer said, I will be dismissed on anyone with Judaism or continuous service can bring a dismissal gray but potentially for reason that you'd be relying upon the employer. Is SOS offset some of the substantial reason?
16:18
That's sort of catch all category. It doesn't quite fit in the misconduct capability and all those other types of reasons. And again, it's not a redundancy which is one of the other reasons. So that's why you would be looking at. So I saw here, also wrongful dismissal is a rich, but that should be manageable. Because as long as you pay the correct OTC, usually pay and live in that circumstance, rather than having an employee continue to work under the terms, whilst everyone else has moved onto the new terms that they've agreed to that can, obviously, create difficulties. So usually, it takes it paying into loop. So you do have control over that. Does occasionally this potential discrimination risks arising through this kind of a bit, not already got time to go into those today. And more often than not, it's just straightforward on the dismissal. So the first and most important point is that you need a sound business reason and this is probably the trickiest point that the employers tribunals to struggle with.
17:15
Because nobody else and I've never come across an employer making these changes without a good, a good. he's not in colloquial sense. A good reason for it. It's a, It's a time consuming, tricky, difficult process to go through. It's likely to cause upset. You're likely to their employees. So, employees just don't do it on a whim Or for that reminder reasons, there's usually a good reason behind it, but that doesn't necessarily mean tweets.
17:44
At the other end of the scale, it doesn't have to be.
17:47
So seriously, if you don't make these changes, it is essentially going to be the end of the business. Obviously, if that is the case, you will have a really, really strong defense to any special claims, but more often than not, that isn't the case. It somewhere in-between, giving it, for no particular reason at all. and it be necessary to support the business. That's a huge gray area. And it's why this is such a tricky scenario because there's so many factors, which I'll come on to in a second. But the tribunal will need to consider as a rule of thumb, if it's kind of just cost savings that a nice to have. But what if we didn't have those cost savings, it wasn't necessarily causing massive problems, it would just have a bit of an impact on the bottom line. If that's the only rationale, then you're probably up against it. I always prefer it, if I'm advising on that. If a client comes and says, well, you cost saving may or may not be a factor.
18:38
But there's also all of these other operational, or customer driven, or whatever it might be, all these other regions in the background, even eat to make these changes. That's generally better if you're looking at just cost. It doesn't mean you can't do it. But it just.
18:56
The fact is relevant to the reasonableness of the dismissal courts.
18:59
Look, look at this holistically, so they look at the employee's motivation in terms of all three of these changes, but also the employee's reasons for rejecting it, and it's, it's basically a bit of a balancing act.
19:12
So the key point to take from that is that it's perfectly possible to have a situation where an employee quite reached, for quite reasonable reasons, turned down the offer of a new contract, but that doesn't necessarily mean it will be unfair as long as the employer had a really good reason for needing to force you to change. And so, I'll say it is a balancing exercise, the will be times where, where that could render unfair.
19:35
But don't think that just because an employee, already, I'd like to read this, but I can't because of X, Y, and that doesn't necessarily mean that your, your stuff, Because, it's just, that you need to bear in mind, In terms of the fact is commonly taken into account, In terms of determining whether it's been fair.
19:52
I've got a list of them that I scribbled here, and there's a lot, which is, to the point I'm coming to come to you showed us the employer's motivate employees. Employees, reasons for rejection, as I just mentioned. Was reasonable warning? Being given the changes and impactful explained, has the input or assess the impact of the changes on the employees? Have they considered alternatives? That's an important one. Was a genuine consultation process, followed all of these factors that the Court take into account. And you'll see a lot of them actually relate to the procedure that Helen run through. So it's really important to do with our procedure if you don't. Then even if you do have a sound business reason for the change, you could end up having dismissals found to be at least procedurally unfair.
20:34
Interesting facts that sometimes get forgotten is has the majority the majority of the workforce accepted The changes. That is irrelevant factor. So, if you're looking at making changes to 100 people in 1009, people have accepted it. It's going to be harder for that individual to argue that these changes were unreasonable than than it would be if it was 50 of the workforce. 50 attacks had accepted. I likewise, if you've got a trade union involved, or employee representatives form, something of that nature, if you've spoken to them beforehand. Whether as part of a compulsory collective computational, What you've just decided to speak to them anyway, if they agree to it, signed off on the changes, then, again, that is massively helpful. It's not a green light to sell your data. And that's quite interesting, actually, incredibly in the context of the British Gas case, which is the most high profile on alignment. There were a number of trade unions involved and only one of the objected to it.
21:30
And although there's still quite a large number of individuals who are rejecting the changes against the workforce as a whole, it is a relatively small proportion. So I'd be interested to see that as and when those cases come to ..., I'm sure they will. How they go?
21:44
Because those two factors, at least to the point in Centrica statement, think Hallam you're just going to quickly look at couple of non lethal factors.
21:55
Yeah, thanks, Matt. You know, there are the commercial risk really, to take account of when you're considering this. There is the potential for sort of employee relations to be impacted and for damage to be to be done on this, particularly if the process is managed, you know, Insensitively, an employee concerns aren't aren't listened to asthma's explored earlier in terms of some of the British Gas and so on, other public bodies that have become sort of named and shamed in the press for trying to force this through this, the potential for there to be damage to.
22:35
Public image. I think a number, you know, this, this quite a number of employees. He's considered that.
22:43
Actually there's a moral obligation during the pandemic during the last 12 months that we've all gone through to try and keep stuff on and to try and limit sort of financial impacts, et cetera, on employees. So I think that's something to bear in mind, which certainly, you know, most of our clients have had uppermost in their, in their minds when they're considering these. These kind of changes. OK, so I'll come back to remain and now, because hopefully, I think we've got some time for some questions.
23:16
Thank you guys.
23:17
So the first question is, contract rule to be said to have valid all flexibility clauses.
23:25
I mean, we could probably do a whole webinar. On that question, it would be fat, because it's it's a really good question.
23:31
And I mean, Jen, as a very rough rule of thumb, the more specific the flexibility clause, the more likely it is to be enforceable. So this sort of very general, across the element ... on that just says, you know, we can embed any terms and conditions of the contract. We noticed you're always fighting an uphill battle. If you're trying to enforce those. So, you typically sometimes get them more specifically in relation to certain terms within the contract. But yeah, H that, there's lots of factors that will be considered by calling in those sorts of cases.
24:01
So, it's a really good question, because, it is a tough question. But I think it's not one, we've got time to delve into any deeper than that, and if you add anything to that?
24:11
No, no.
24:12
I think I would agree with agree with that, Matt.
24:14
Thank you. Next question is, If the employee incentive to get consent is an alternative to dismiss and re-engagement, an employee would say that they had no real alternative and to accept? How safe would this be?
24:30
I think that's a bit of a risk, isn't it, because, arguably, are they actually saying that they're there, they're working, but it's under protest.
24:39
They've gotten around alternative, other than to accept, I think, then prompt you. You're looking to see, you know, whether that does amount to a protest, whether they are working under protest, or not, and napkins, and the onto the old phrase, but I think it would depend very much on the circumstances. As to what they've said.
25:00
We talked earlier in the in the session about whether consent can be implied effectively by an employee not raising any concerns and carrying on working.
25:12
You know, the general passage of time might be, at that point, you can inclined that consent has, has been given.
25:20
I think what you're worried about, or that this question is asking, is, you know, effectively, it's a source of the consent and duress. I think you know, kind of implying. I think that may then form and the fact that consent hasn't been freely given, it's it's not true consent.
25:37
Sorry I just add on it, just, the fact that I just mentioned there's a possibility isn't going to data for someone to say, well, a lot of I couldn't have given mindful and consent because that, generally speaking, when you go through this process, the idea is that you are very open about the non threatening way. You can be, but it's not a secret. That a potential outcome of all of this is a dismissal. And so, it needs something as as exactly as Helen said A little bit more, I think, than just the threat. But, yes, as soon as you start applying real pressure and just, the way you frame that possibility can sometimes cause you problems, because if you do it in a very neutral way, that's fine.
26:14
But, if you do use language, that seems quite threatening than, that can cause problems down the line, thinking, in terms of backing into protest, to stick to all the titans or actually rack new arrangements.
26:28
Well, the idea of what enterprises is an E You comply with the new terms, but you're not agreeing to them, and sometimes it's easier to work under protest.
26:36
And so, there are certain situations where it's a bit harder to argue that you're working under protest.
26:44
I'm still agreeing to the terms, whereas there's a, there's other things. So, for example, if there's a change, etcetera conditions, it doesn't perhaps have an immediate impact on that same. Taking away certain benefits that the conditional private health cover, whatever it might be. It's very nice. That helps out just carry on working inside, don't accept these, where it's things like a change in working hours.
27:05
that has an immediate effect.
27:07
You can, you can still agree to those new hours and work into protests, but be from the employees perspective, you need to be as clear as possible. In those circumstances that you are working under protest and again, had any touched on this before, it's very often it is a bit unclear. So you'll get some money, when, you know, getting a bit and complaining in the background: that may not sound strong agenda in a certain way, not in a derogatory sense, but that they're making noise in the background that they're not happy, but they do still work. And it's not quite clear whether they're just rambling, but have accepted it, or whether they actually say, no. I don't have a choice because the alternatives dismissal I can contemplate, that's all keep working, but I do not accept these. These hours is seven times a bit of a gray area.
27:50
We'll just take one more question which is, if someone is unsuitable for a role and is making errors, can you offer an alternative role if you offer the same rate of pay?
28:03
Yeah, I think, I think that's probably, move, focusing on a performance management process, really, if someone's on and suitable for a role and not not performing, I think that's where that question's coming from.
28:18
So certainly, you know, if you'd gone through performance management process and you would considering dismissal from that role because them and suitable for that row, then consideration of alternative roles would always be a factor that you would, that you would consider.
28:37
I think, yeah, I think we need to be careful.
28:40
No, trying to use, fire, and re hire in that kind of scenario, where, perhaps, it's more performance management tissue, might be slightly dangerous. Should you get into an unfair dismissal claim? And you have to sort of pin your colors to the mast, as to what the reason for the dismissal was.
29:00
Didn't I'm sorry. My ego And no, no, no. I'm just going to say in that kind of scenario, the fact that you're looking at an alternative role could be it's unclear whether it's a demotion or not. But in one sense, it may not be if you're saying that the salary is likely to be the same.
29:17
So that would be relevant, a rule to the fairness of the, of the dismissal, or the potential dismissal in that case.
29:25
Yeah. I was just going to just quickly sometimes comes up in the context more of redundancy.
29:29
So a role will be made redundant, but then lo and behold, a new role is recruited with perhaps a slightly different title or something. But that seems to be doing a lot of the same work. And tribunals will investigate, And, it might find, that, will, surprise, surprise, the person who was redundant was, was under performing anybody, so that, effectively, redundancy been used. There was a mask for performance management situation. So, it's more commonly crops up in redundancy situations, but it could A crop up in a sort of suggestion of a false fire. And, Mihai, Where it wasn't actually the reason that ultimately led to discussions.
30:01
OK, we've gone over time, so as I said, any questions that are left over, we should be able to respond to it as long as we have the details of the 10 day. It's anonymous available to you. But where we've got a contact details on ..., we will certainly be in touch. Otherwise, yeah. Thank you, everyone, for joining, and have a great day.
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