Following the unceremonious sacking of hundreds of P&O Ferries’ staff last year, the UK Government promised to review ‘fire and re-hire’ practices and, it has now published the long awaited draft Code of Practice on Dismissal and Re-engagement for consultation. (You can read more from our Employment Law experts on the P&O saga here.)
In the consultation’s ministerial foreword, Business Secretary, Grant Shapps, says that the Government is publishing the draft Code to ‘clarify and give some legal force to accepted standards about how employers should behave when seeking to change employees’ terms and conditions.’ He goes on to note that it is important ‘to ensure that employers and employees are better equipped to manage change in a more balanced and collaborative way.’
With the impact of industrial action being seen across the country this winter, it is no wonder that the Government is attempting to improve industrial relations in some way, but what does this new Code really mean?
Why is the new Code being introduced now?
It is important to note that the Code is not envisaged for use in genuine redundancy situations. Instead, it sets out employers’ responsibilities in situations where they are seeking to change the existing employment terms and conditions for their staff.
Unsurprisingly, if proposed changes are viewed by employees as being a derogation of their contractual rights, they may refuse to accept them. In that situation, employers may ultimately decide to dismiss their staff and either:-
- offer to re-engage their existing staff on the new terms; or
- engage an entirely new workforce on the new terms.
Employees (and the general public) might see this as a drastic measure for employers to take but following a review in 2021, ACAS found that this practice (although increasingly prevalent due to the covid-19 pandemic) was nothing new.
What is in the draft Code of Practice on Dismissal and Re-engagement?
The Code sets out that there should be a full and meaningful consultation with unions, staff and other employee representatives. If it becomes clear that staff will not voluntarily agree to the new terms and conditions, the Code says that employers should re-examine their business strategies and consider the consequences for employees of continuing to implement the new terms and conditions. In all of this, the Code notes that employers should not use the threat of dismissal to pressure staff into agreeing.
During the consultation period, employers should think about setting out some key information for employees and their representatives, which might help them understand the proposed changes. This information could include-
- what the proposals are;
- which staff will be impacted by the proposals;
- why are the proposed changes needed;
- the likely timeframe for implementing the proposed changes; and
- what other options (if any) have been considered and why those options are not viable.
What will the legal status of the Code be?
While the Code will not have legislative force, it has the potential to be relevant in Employment Tribunal claims as the Tribunal will have the power to:-
- increase any award it makes by up to 25%, if the employer has unreasonably failed to comply with the Code; or
- decrease any award by up to 25%, where it is the employee who has unreasonably failed to comply.
It’s important to understand that the Code will not completely get rid of fire and re-hire tactics however, it is likely to help staff resist, change and possibly stop some changes to their terms and conditions. The hope is that employers will think twice before taking any controversial steps without consulting and instead consider the impact of their actions on staff.
The Code is still in draft form and the Government is seeking views on it until 18 April 2023 - you can download the draft Code and respond to the consultation here.
Following the end of the consultation period, any suggested amendments will then need to be incorporated before the final Code is put forward for Parliament’s approval. Until the Code comes into force, employers should continue to review the ACAS guidance on employers’ responsibilities when making changes to employment contracts, which can be viewed here.
If you would like to discuss this issue in more detail, please contact a member of Thorntons’ Employment team on 03330 430350.
