20/09/2022

The practice of ‘fire & rehire’ has attracted a lot of negative press in recent months, particularly since the mass dismissals by P&O ferries in March this year albeit that was a fire, without the rehire.

Fire and rehire refers to the practice whereby employers terminate an employee’s existing contract & re-engages that employee on different terms in order to make a contractual change. Whilst this practice is lawful, it is very controversial. In our experience,  employers only move to dismiss  and re-engage as an absolute last resort and after following a process of engagement and consultation to try and agree the change in the first instance.

Background to Tesco v USDAW

In February 2022 the High Court (HC) granted an injunction against Tesco preventing them from dismissing and re-engaging employees the purpose of which was to remove a benefit that had previously been described as a permanent right to retained pay.

The HC found that Tesco had previously guaranteed certain employees a permanent benefit that they were now seeking to remove. HC therefore implied a term in the workers’ contracts preventing them from terminating the employees’ contracts if the aim was to remove this right to ‘retained pay’.

Court of Appeal decision

Tesco appealed to the Court of Appeal (CA) and on 15 July 2022 the CA delivered its judgment overturning the injunction restraining Tesco from ‘firing and rehiring’ effectively  paving the way for this to happen. The CA held that there was no authority for an injunction to prevent a private sector employer from dismissing an employee for an indefinite period.

It is arguable that the Tesco case/judgment is fact specific. However, the decision will be very welcome for employers as it restores the position back to the original starting point. The full Judgment can be accessed here.

Following the P&O Ferries saga, the GB government came under pressure to act. Less than two weeks later, on 29 March 2022, the GB government introduced a ‘New statutory code to prevent unscrupulous employers using fire and rehire tactics. Whilst the Code applies to GB only, it contains good practice guidance. Therefore in NI employers comply with the code when dismissing and re-engaging any of its workforce, it may assist in demonstrating the fairness of such dismissals.

We recommend taking specific legal advice prior to making any steps to terminate an employees contract of employment.