Fire and Rehire Practices

Fire and rehire (or dismissal and re-engagement) is a practice where an employer dismisses employees who refuse to accept proposed changes to their terms and conditions of employment, and then offers to rehire them on the new (generally inferior) terms. It is used as a lever to impose changes that employees have not consented to through negotiation.

Common contexts where fire and rehire has been used include:

• Reducing pay or contractual benefits during cost-cutting exercises
• Changing working patterns, shift structures, or working locations
• Removing contractual bonuses or overtime arrangements
• Altering pension entitlements or sick pay provisions

Fire and rehire is distinct from varying a contract by agreement (where the employee consents to the change) or redundancy (where the role itself disappears). It is also distinct from genuine restructuring where roles genuinely change and TUPE transfers are involved.

The practice is controversial because it is used to circumvent the requirement for employee agreement to contractual variations — effectively compelling consent under threat of dismissal.

The Code of Practice on Dismissal and Re-engagement was introduced by the Department for Business and Trade and came into force on 18 July 2024 under the Trade Union and Labour Relations (Consolidation) Act 1992. It sets out the steps employers should take before considering fire and rehire:

1. Explore all alternatives: Employers should genuinely explore alternatives to changing terms and conditions — including negotiating with employees and their representatives, considering whether the business changes are truly necessary, and phasing in changes.
2. Share information early: Employers should provide full information to employees and representatives about the proposed changes and the business reasons for them, allowing meaningful consultation.
3. Allow time for consultation: Adequate time must be given for consultation — the Code does not prescribe a specific period but expects genuine engagement proportionate to the circumstances.
4. Fire and rehire as a last resort: Dismissal and re-engagement should only be used as a last resort after genuine consultation has failed to reach agreement. The Code explicitly states it should not be threatened at an early stage to put pressure on employees.
5. Workforce welfare: Even where fire and rehire proceeds, employers should consider the welfare of affected employees, give maximum notice, and allow a reasonable period to accept the new terms.

The Code does not make fire and rehire unlawful — it sets standards that tribunals will consider when assessing the fairness of any dismissal.

The key enforcement mechanism of the Code is the 25% uplift to Employment Tribunal awards. Under section 207A of TULRCA 1992 (as applied to the Code), if an employer has unreasonably failed to comply with the Code in circumstances relevant to the claim, the Tribunal must increase any award by up to 25%. Conversely, if an employee has unreasonably failed to comply (for example, by refusing to engage in a genuine consultation process), the Tribunal can reduce the award by up to 25%.

This means that in any unfair dismissal, wrongful dismissal, or discrimination claim arising from a fire and rehire situation, the tribunal will assess the employer's compliance with the Code as part of its deliberations.

The Code is not the only enforcement mechanism. Depending on the circumstances, employees may also have:

• An unfair dismissal claim (if dismissed and the dismissal was not for a fair reason or was procedurally unfair)
• A breach of contract claim if the employer tried to impose new terms without dismissal
• A collective redundancy claim if 20 or more employees were affected and the collective consultation requirements were not met
• Rights under TUPE if the change was connected to a business transfer

The P&O Ferries case (March 2022) was the catalyst for the Statutory Code of Practice. P&O dismissed 786 seafarers instantly, without any consultation, replacing them with agency workers. The company's CEO admitted to Parliament that the company had deliberately not consulted because it knew unions would oppose the changes.

Despite widespread condemnation, criminal investigations, and parliamentary scrutiny, no criminal prosecutions were brought. The company paid settlement payments to affected seafarers. The case highlighted the inadequacy of existing employment protections and led directly to the Code.

If you are threatened with or subjected to fire and rehire, your options include:

• Refuse the new terms and bring an unfair dismissal claim — dismissal by way of fire and rehire can potentially be fair for 'some other substantial reason' (SOSR) if the employer can show a sound business reason and followed a fair procedure. However, if the employer did not follow the Code, did not genuinely consult, or the business reason does not stack up, the dismissal is likely to be unfair.
• Accept the new terms under protest — accepting the new terms while reserving the right to challenge is legally possible, though complex. Mark any acceptance clearly 'under protest and without prejudice to my existing contractual rights'. Seek legal advice immediately if considering this approach.
• Seek an injunction — in exceptional circumstances, trade unions or employee representatives can seek an injunction to prevent the dismissals going ahead pending proper consultation.

Seek advice from your trade union, Acas, or an employment solicitor as soon as fire and rehire is threatened. Time limits for tribunal claims are strict — generally 3 months minus one day from dismissal.