Evidence of workplace fire-and-rehire practices published

16 Jun 2021

An evidence-gathering exercise into the use of fire-and-rehire practices has been published by ACAS, after it was commissioned by the Department for Business, Energy and Industrial Strategy (BEIS) in October 2020.

Over the course of 2020, public attention increased on the use of 'fire-and-rehire' practices during the COVID-19 pandemic. These practices include where employers dismiss then re-employ workers on changed terms and conditions, or where the prospect of doing so is put to workers during negotiations about changing their terms and conditions.

The pandemic has required many employers to take a radical look at their business operating models. Reports have suggested that some employers have used fire-and-rehire practices in these circumstances. There have been concerns that some employers are using the pandemic as a pretext to diminish workers’ terms and conditions and using fire-and-rehire as a tactic to undermine or bypass genuine workplace dialogue on change.

Ongoing parliamentary scrutiny of such practices has seen some cross-party support emerge for a Private Members’ Bill seeking to reform the law on unfair dismissal to curb their use. At present, an employee generally requires need two years' service to bring a claim for unfair dismissal. Concerns have been expressed across the political spectrum, including by the Prime Minister, the Secretary of State for BEIS, the Labour Party leader, Scotland First Minister, Wales First Minister and others.

In October 2020, officials at the Department for Business, Energy and Industrial Strategy (BEIS) invited ACAS officials to carry out an independent and impartial fact-finding exercise with stakeholders to inform BEIS’s policy thinking on this issue. ACAS was not asked to present recommendations to government.

ACAS engaged with stakeholders from employer bodies, trade unions, professional bodies and networks with advisory contact with employers, covering employment lawyers, accountants, HR and payroll services, academics and ACAS senior advisers.

Key findings are summarised below.

Patterns of use of fire-and-rehire practices
Participants reported that fire-and-rehire is not a new phenomenon, with observed use of the practice predating the COVID-19 pandemic by many years.

There was a shared sense among some participants that the practice has become increasingly prevalent both in recent years and during the pandemic.

There were some concerns that the prospect of fire-and-rehire has been used increasingly as a tactic at an early stage of negotiation processes. Others suggested such use may be linked to the nature of the urgent business challenges thrown up by the COVID crisis, where the timescale available to reach agreed solutions may be shorter than at other times.

While media reports on the use of fire-and-rehire have focused on a small number of cases involving disputes between large employers and trade unions, participants had observed more widespread use of the practice across a wide range of industries and sectors; in small, medium and large organisation sizes; and in both unionised and non-unionised workplaces.

There was a shared anticipation that a further increase in use of the practice might be expected at such time as the Government’s furlough and COVID-related business support initiatives are wound down, especially if economic recovery is slow.

Workplace circumstances in which fire-and-rehire is used
Participants reported fire-and-rehire being used in a wide range of workplace circumstances, both prior to and during the COVID-19 pandemic. These included:

Redundancy scenarios (in connection with both minimising redundancies, and maximising overall headcount reduction by making relevant changes to remaining staff contracts).
Harmonising terms and conditions (in relation to both business transfers and other contexts).
Introducing temporary or permanent flexibility into contracts in terms of working hours, shift patterns, payment entitlements and security of hours or employment.
Interrupting continuity of service.
Negotiations around organisational responses to changes in consumer behaviour, sectoral change or changing operational needs.

Perspectives on the use of fire-and-rehire
Participants of all types emphasised the significance and scale of the business challenges presented by the COVID-19 pandemic, in terms of both immediate business survival and long-term sustainability. It was emphasised that fire-and-rehire is by no means a universal approach being taken by employers during the pandemic, and that the crisis has also seen widespread examples of good practice in collaborative working between employers and workers in finding suitable adaptations at this time.

However, some participants pointed to examples of what they regarded as employers using the crisis opportunistically as a 'smokescreen' to diminish workers’ terms and conditions; and the use of fire-and-rehire as a negotiation tactic to undermine or bypass genuine workplace dialogue on change.

A related recurring theme was the use of fire-and-rehire in the context of longer-standing negotiations that are now being revisited during the COVID-19 pandemic. There were differing views as to whether its use in such circumstances provides examples of opportunism or rather is being driven by the need for significant, rapid and long-term re-shaping of business operating models at this time.

A wide range of views were expressed about the perceived reasonableness or otherwise of the use of fire-and-rehire where it occurs in different scenarios. It was not possible to identify a single shared perspective on when the practice may be viewed as unreasonable or not:

Some regarded its use in any circumstance as unreasonable.
Others expressed concern about the imbalance that fire-and-rehire brings to negotiations when ‘threatened’ as a negotiation tactic.
A further perspective was that the practice can be reasonable only if used an option of genuine last resort.
Others felt its use was not necessarily contentious provided it is driven by a genuine business need and is preceded by negotiations attempting in good faith to reach agreement on proposed changes.

Perspectives on the current legal framework
There are a number of existing legal protections and obligations that employers may need to comply with if considering fire-and-rehire, depending on the specific circumstances.

Participants expressed differing views about perceived strengths and gaps in the existing protections for workers. These ranged from those who felt strongly that the current level of protection for employees clearly falls short, to others who felt the current balance of protections is broadly about right.

Views about the need for solutions and potential measures to address fire-and-rehire
There were mixed views on the need for measures to address the issue of fire-and-rehire. Some questioned the need for solutions at this time; others felt more needs to be done to ensure the balance is right between protecting business flexibility and protecting employees’ power to negotiate a fair bargain.

A range of potential legal reforms and other interventions were suggested to either prohibit or to more strongly disincentivise the practice, while some urged caution in considering whether any particular remedy might create a worse problem than the one it is intended to address, for instance by driving more redundancies or business failures.

Suggested legislative options included tightening up the law around unfair dismissal; enhancing the requirement and capacity for Employment Tribunals to scrutinise business’ rationale for change in relevant cases; protecting continuity of employment in fire-and-rehire-scenarios; and strengthening employers’ consultation obligations around proposed dismissals.

Suggested non-legislative options included improved guidance for employers on relevant legal obligations and good practice; using data on fire-and-rehire to inform decisions around public procurement and access to government funding; and publishing ‘name and shame’ data on employers’ use of fire-and-rehire practices on a government website.

Views were also expressed about the relevance of a number of wider policy considerations, ranging across:

Extending government funding for sectors where fire-and-rehire is particularly prevalent.
Considering the value of providing longer-term information about the future of the furlough and related business support schemes, to help facilitate workplace negotiations based on a shared understanding between employers and their workers about this aspect of their organisation’s future context.
Improving access to remedies at the Employment Tribunal by alleviating the strain on the Employment Tribunal system at this time.
Considering the broader question of improving channels for communication and consultation in non-unionised workplaces.

The full report is available to view here.