Fire and rehire update: Acas publishes advice to help employers avoid fire and rehire practices

Background

As detailed in our recent alert on the topic, the Department for Business, Energy and Industrial Strategy asked Acas to conduct an evidence gathering exercise on the use of fire and rehire practices. The results from this exercise were published in June 2021 and in response, the Government asked Acas to produce guidance to help employers explore all other options first before considering fire and rehire to change employee contracts.  This new advice has now been published.

What is covered in the new Acas advice?

The advice covers the following areas.

What should an employer consider before proposing an employment contract change?

Acas recommends employers consider what issue they are trying to solve and if a contract change is definitely needed to solve it.  Acas explains that exploring options and being clear about why a contract change may be needed will help when it comes to informing and consulting with employees and representatives about potential contract changes.

When may employers need to consider contract changes?

Acas provides the following examples of when employers may need to consider employment contract changes:

• to make sure contracts are up to date with new laws or regulations;
• to better reflect someone's role if it has changed;
• to introduce new terms and conditions, for example contractual redundancy pay or enhanced maternity, paternity, parental or adoption leave and pay;
• to reflect changes to an organisation, for example if it's considering moving to a different location or changing reporting lines;
• to help an organisation better adapt to changing customer needs;
• economic reasons, for example if an organisation is considering a restructure or other changes to stay competitive in a changing market.

While in some circumstances changing an employment contract can bring benefits to an organisation and its employees, it can also bring significant risks.

What are the risks to consider when changing contracts?

Acas advises that if changes are not managed well the risks may include:

• damaging working relations;
• legal claims, for example claims of breach of contract or constructive dismissal;
• a decrease in commitment and performance, if employees do not support the changes, or feel they have not had the opportunity to inform decisions;
• increased levels of stress or absence;
• unlawful discrimination, for example if changes are introduced that apply to a group of employees but put employees with a certain 'protected characteristic' at a disadvantage;
• ·valued people leaving an organisation, if you propose a change they do not support or agree to;
• reputational damage to an organisation or brand, making it difficult to attract new employees;
• strikes or other industrial action if there's a trade union; and/or
• collective action by a group of employees that's not authorised by a trade union ('wildcat' industrial action).

Understanding the options for making a change

• Individual employees - if employers are considering a specific change for a certain employee – they should consider discussing and agreeing it directly with the employee (and their representative if they have one).
• Number of employees – if the changes affect a number of employees’ contracts it may be more appropriate to discuss with employee representatives as well as individuals.
• Collective agreements – if employers are considering changes to terms and conditions covered by an agreement with a recognised trade union (a collective agreement) then employers must always consult with that union.

What if there has been a TUPE transfer?

The Acas advice correctly identifies that there are important additional considerations if employers are considering changing terms after a TUPE transfer.  Our employment team at Stephenson Harwood LLP would be happy to discuss this with you in more detail.

Summary

An accompanying statement by the Acas Chief Executive, Susan Clews, provides a neat overview of the new advice.

"Our new advice is clear that fire and rehire is an extreme step that can seriously damage working relations and has significant legal risks for organisations.

Employers should thoroughly explore all other options first and make every effort to reach agreement with staff on any contract changes.

Organisations that consult with their workforce in a genuine and meaningful way about proposed changes can help prevent conflict at work and stay within the law."

For more information on this topic please contact Kate Brearley, Leanne Raven or your usual Stephenson Harwood contact.