UK Employment Law Coffee Break: Fire and rehire, menopause, and our February HR Pensions spotlight

Dismissal and re-engagement: Consultation response and revised draft Code of Practice

Following a consultation last year on a draft Code of Practice on Dismissal and Re-engagement, the government has published its response and a revised draft code.

Dismissal and re-engagement (also known as "fire and rehire") refers to when an employer considers making changes to one or more of its employees' contracts of employment but where no agreement to some or all of the changes is reached, and the employer instead opts to dismiss an employee and offer them a new contract on new, often less favourable terms. The use of this mechanism has received increasing media scrutiny over recent years, given the inevitable deterioration in industrial relations which can result. Introducing a new statutory code is intended to make "clear how employers must behave in this area" and that dismissal and re-engagement is only used as a "last resort".

Employers should note that the code applies regardless of the number of employees affected, or potentially affected, by the proposed changes and regardless of the employer's reasons for seeking those changes. The revised draft code confirms, however, that it does not apply where the only reason an employer envisages that it might dismiss a given employee is for redundancy.

What does the revised draft code provide?

The draft code sets out both general and specific considerations for employers when informing and consulting with employees and/or their representatives on the proposed changes, as well as reminding employers of the need to ensure compliance with any other existing legal obligations. Significantly, it provides that an employer "should" contact Acas for advice before raising the prospect of dismissal and re-engagement.

Other points to note include:

Provision of information

Who information is provided to (such as relevant employee representatives or employees individually) will generally depend on what is reasonable in the circumstances, although an employer may need to comply with other applicable legal obligations when making its choice. The type and style of communication should avoid certain employees being excluded.

Employers should share as much information regarding the proposals as reasonably possible and as early as reasonably possible; "this promotes trust and enables meaningful consultation, giving the parties more time to reflect on what information, raise questions, suggest and explore alternative options and formulate solutions".

More specifically employers should consider what information could be provided to the employees/representatives: for example, what the proposals are and the business reasons for them, who will be affected, the anticipated timings, any other options considered and proposed next steps.

Consideration should always be given to whether any further information requested can be provided. Where an employer reasonably concludes that it is unable to provide such information, for example where it believes that it is commercially sensitive or confidential, the reason for this should be explained as fully as reasonably possible.

Consultation

To enable meaningful consultation, the parties should engage with each other openly and in good faith. Any reasonably alternative proposals should be genuinely considered with a view to reaching an agreed outcome.

Consultation should continue for as "long as reasonably possible"; a "longer consultation period is likely to allow for more in-depth discussion and a deeper understanding of the rationale for the proposals and the nature and intensity of any objections", facilitating "a more thorough exploration of alternative options and increase likelihood of an agreed outcome being reached".  

Raising the prospect of dismissal and re-engagement

While an employer should be clear about any intention it has to opt for proceeding with dismissal and re-engagement if an agreed outcome cannot be reached, this should not be pursued "unreasonably early" as it can be detrimental to attempts to reach an agreed outcome.  

Acas should be contacted before raising the prospect of dismissal and re-engagement.

A threat of dismissal should also not be used as a negotiating tactic to put undue pressure on employees in circumstances where the employer is not in fact envisaging dismissal as a means of achieving its objective.

Re-examination by the employer

Where an employer considers it still needs to implement the changes but it becomes clear that agreement cannot be reached, the employer should re-examine its proposals, taking into account any feedback from employees and/or their representatives.

The code sets out factors which an employer should consider in this re-examination including: the objective it is seeking to achieve, the negative consequences of imposing the proposed changes, whether its proposals could have a greater impact on some employees than others and whether there are any reasonable alternative ways of achieving its objectives.

Dismissal and re-engagement

An employer who has participated in a "thorough and open information sharing and consultation process, as part of which it has genuinely considered any reasonable alternative proposals" might opt for dismissal and re-engagement as a "last resort".

As much notice as reasonably practicable should be given of any dismissal (together with any applicable notice periods) and an employer should also consider "whether employees might benefit from more time in order to make arrangements which might better enable them to accommodate the changes; for example, where the changes include changes to working hours, some employees may need to adapt their childcare arrangements or plan new journeys to work".  Employers should also consider what practical support might be offered, with examples given of relocation assistance, career coaching or counselling for emotional support.

It may be appropriate to implement changes on a phased basis and an employer should also consider whether it might commit to reviewing the changes at a future point in time "with a view to reconsidering whether it still considers the changes to be necessary".

It is good practice for an employer to invite feedback about the changes as employees adapt to them and "consider what might be done to mitigate any negative impacts on employees".  

Next steps

The draft code is now awaiting Parliamentary approval. Once in force, failure to follow it will not in itself make a person or organisation liable to legal proceedings. However, this will be taken into account in any applicable proceedings before a court, employment tribunal or the Central Arbitration Committee, with a tribunal able to increase any award it makes by up to 25% if an employer unreasonably fails to comply with the code (or likewise, reduce an award by up to 25% where an employee unreasonably fails to comply).                               

The revised draft code has been designed to be more concise and accessible and it sets out a number of important practical points that employers should now take into consideration when dismissal and re-engagement is in prospect. While it essentially reflects what would be considered as existing best practice, employers should note the emphasis on the process being an "ongoing" one – not only in sharing information and considering alternative options prior to proceeding down a route of dismissal and re-engagement, but also in continuing to give consideration to any mitigations which might be appropriate in the circumstances where new terms are offered.

The code also provides a helpful reminder for employers to consider the impact on individual employees; not only those who may be absent while any discussions are ongoing, but also the potential impact of the new provisions proposed, including the practical effect on an employee day to day and any potentially discriminatory impact.

The government has issued the code to take action against "unscrupulous employers to tackle the use of controversial 'fire and rehire' practices" and has sought to "protect workers' rights while respecting business flexibility". The code does provide some comfort to employers in this respect, stating that "it is for an employer to make economic decisions for the benefit of the business and to set the strategic decision of the business" and reflecting the fact that the provision of information may well be difficult where it is confidential or commercially sensitive and that a shorter consultation process may be appropriate where, for example, a business is suffering a financial crisis.

However, it is clear that employers should now expect closer scrutiny on any proposed changes to terms and conditions of employment and that the code should now be considered alongside an employer's legal obligations.  

EHRC publishes guidance on menopause and the Equality Act

The Equality and Human Rights Commission has published guidance on menopause in the workplace, setting our an employer's legal obligations under the Equality Act 2010. The guidance has been published against the backdrop of increased awareness of the way in which the menopause can have an impact on an employee's working life, and a focus on keeping older workers in the workplace or encouraging them to return to work.

The EHRC press release notes that it is increasingly important for employers to know how to support workers experiencing menopause symptoms, not only to ensure they meet their legal responsibilities, but also so that these individuals are able "to continue to contribute to the workplace and benefit from work".

The guidance clarifies an employer's legal obligations – in addition to health and safety considerations, the guidance states that "if menopause symptoms have a long term and substantial impact on a woman's ability to carry out normal day-to-day activities, they may be considered a disability" and an employer "will be under a legal obligation to make reasonable adjustments and not to discriminate against the worker". Additionally, workers experiencing menopause symptoms may be protected from less favourable treatment related to their menopause symptoms on the grounds of age and sex.  

The guidance also provides practical tips for employers on making reasonable adjustments and fostering positive conversations about the menopause with their workers. Employers are "encouraged to carefully consider the guidance" and adapt their policies and practices accordingly.

In the context of a rise in Employment Tribunal claims and an increasingly older workforce, now is the time for employers to educate their managers on how menopause can be a factor in performance, conduct and sickness absence issues and to ensure that any related workplace policies reflect this and appropriate training is provided. The guidance highlights the importance of a respectful culture and the need for employees experiencing menopausal symptoms to be treated sensitively and with dignity.  

HR pensions spotlight for February: Are you ready for the removal of the lifetime allowance?

The lifetime allowance limits the amount that employees can build up in registered pension schemes over their lifetime and still receive tax relief. In the 2023-24 tax year the lifetime allowance is £1,073,100. However, on 6 April 2024 it will be removed and replaced with two new lump sum allowances. In our Insight we look at what is changing and what employers need to do to prepare.

Actions include understanding the effect of the changes on pension scheme rules, on policies for high earners, and on any top up pension or life cover arrangements. Employers also need to decide what, if anything, they are going to say to pension scheme members about these changes.

If you have any questions, your usual Osborne Clarke contact or Claire Rankin, partner in the pensions team, would be pleased to help.