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Can ‘fire and rehire’ be fair?

Accept these worse terms or lose your job.”

That is the crux of ‘fire and rehire’ – the strategy that some employers have turned to in recent months. In isolation and out of context, it’s an unpalatable concept. In fact, ‘fire and rehire’ has been labelled by one trade union as ‘a dirty, bullying tactic used by unscrupulous bosses’. Boris Johnson has been a little more restrained, reportedly calling it ‘unacceptable’.

Calls for its ban have not yet brought a positive result for campaigners, but high-profile businesses that have taken a fire and rehire approach have not gone under the radar. Their actions have been made public, and it’s for people to make up their own minds about the rights and wrongs of forcing contractual changes through in this way.

Because this isn’t black and white. Employees who are presented with fire and rehire as a fait accompli may, legitimately, feel pushed into a corner. It may seem utterly unfair to face having their terms of employment downgraded. But, as this pandemic has proved, circumstances can place employers in an invidious position too. Those businesses we have advised on the issue have been desperate to avoid redundancies; they’ve wanted to retain their staff, even though that means asking people to work reduced hours or to accept a lower salary in order for jobs and the business to be kept alive. That is a far cry from profitable employers using fire and rehire to become even richer.

That’s not to say that there isn’t room for exploitation of what can actually be a lawful option. No doubt some employers will take advantage of their workers’ weaker bargaining positions in the current financial climate; they know staff will not want to throw away a secure job. And so there may be moral issues involved here too: do good employers really play their employees in this way? As with so much in employment law, the ‘reasonable employer’ is at the heart of arguments around fairness.

If an employer dismissed with impunity, it must be willing to face the legal and reputational consequences of its unpopular – and sometimes unlawful – decisions. As employment lawyers, it’s our job to help businesses balance their commercial needs and legal obligations, understand the risks, and take the best (occasionally ‘least bad’) steps in the circumstances.

So, would we advise an employer to fire and rehire? Quite possibly, but it shouldn’t be the first step to take.

Where you need employees to work on less favourable terms, it’s usually better to try to agree those changes with them. Simply altering their working hours or reducing their pay without agreement would in any event be a breach of contract, entitling them to resign and bring a constructive dismissal claim, depending on the severity of the change.

Proposed changes should be carefully considered and consulted on: do you really need to make them? How can you minimise their impact? How should you explain the situation to your employees? What will you do if employees won’t agree the new terms? It’s important to involve employees as much as possible in the process and to take on board alternatives they propose. While time might not be on your side when it comes to alleviating financial or other practical pressures, do invest in proper consultation; it could make the difference between a smooth transition and a staff mutiny.

Usually, a fire and rehire strategy would be employed when all else has failed. It is a serious step to take because it means dismissing employees, even though you plan to re-employ them immediately. And with dismissal comes the risk of unfair dismissal (where an employee has at least two years’ service), as well as reputational damage. But it may be the right way to go where, despite your very best efforts, an employee simply will not compromise on their terms. Demonstrating that you have been fair and reasonable all along will stand you in good stead if a claim is brought.

We specialise in helping businesses through difficult practical and strategic issues involving their workforce. Contact us for advice on your situation and we’ll guide you through it.

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