The recent Twitter debacle has shone a useful spotlight on the increase in “fire and rehire” tactics.
In the unlikely case that you missed the news, Elon Musk celebrated his acquisition of Twitter by firing around 3,700 employees. The mass cull was swiftly followed by offers of re-employment for some, apparently because Musk realised their skills might be required after all. Twitter hit the news again when Musk presented his remaining employees with an ultimatum; accept an end to homeworking and commit to long hours, including evenings and weekends, or leave.
“Fire and re-hire” has always been with us, but where it once would have been a “strategy of last resort” it now seems to be viewed as the go-to solution for any business wanting to restructure.
Earlier this year we commented on the mass layoffs at P&O, used as a blunt instrument to force staff to accept new contracts as agency workers. Potential employment claims were avoided through the payment of settlements in excess of what a Tribunal could have awarded. However, the fact remains that P&O employees have surrendered job security and other benefits of full employment forever.
Unfortunately, the protection offered by Employment Tribunals does not seem to be an adequate defence against what some view as a climate where employment rights and job security are being gradually eroded.
Under UK law the only challenge to a fire and hire dismissal is that the employer acted “unreasonably”. The employer must show the reasonableness of the decision under s.98(4) ERA and that it was carried out for “some other substantial reason” (SOSR). However, “reasonableness” is a subjective term and Tribunals are unlikely to refute any but the most obviously corrupt defences.
Some have suggested that Tribunals could be given powers to examine the rationale for a decision in greater detail, maybe with the assistance of lay members with specific expertise. Others argue that it should be made wholly unlawful to fire-and-rehire at all, or that Tribunals should be able to award some form of punitive damages such as those available in discrimination cases.
All these solutions would require Government involvement. For now, the best we have is non-statutory ACAS guidance on “fair” treatment of employees, including meaningful consultation and communication with employees – something Elon Musk didn’t trouble with. https://www.acas.org.uk/changing-an-employment-contract/employer-responsibilities
Encouragingly, in March of this year the Department for Business, Energy and Industrial Strategy proposed that ACAS should develop a Statutory Code of Practice for Tribunal guidance. https://www.gov.uk/government/news/new-statutory-code-to-prevent-unscrupulous-employers-using-fire-and-rehire-tactics
There has been no recent update on that proposal, but if implemented it could potentially carry a 25% uplift for non-compliance and removal of the compensation cap, thus providing a more punitive regime for unfair employment tactics.
In the meantime British employees should be aware that under UK law, if you are “fired and rehired” continuity of employment is preserved under section 219 ERA 1996. You may also be able to claim protection under the Equality Act if a new contract seeks to enforce conditions that would impact on a disability or parental responsibilities.
Ultimately, in a free-market economy where businesses are largely permitted to make the necessary decisions to maintain or improve productivity, it is highly unlikely that a complete ban on “fire and rehire” would receive serious political support. In some circumstances it may be the only solution to break an impasse or to harmonise terms and conditions across a workforce, and a ban would achieve little if it resulted in an increase in business bankruptcies. Where an employer cannot justify either the decision and/or the process there remains a substantial risk of claims along with large pay-outs.
Elon Musk’s explosive takeover of Twitter will no doubt remain in the news for some time. At the very least, his brutal tactics may give a much-needed wake-up call to legislators and the general public, that, without adequate protection, hard won employment rights can easily be lost.
If you are faced with the threat or the reality of dismissal, don’t sign away your rights until you have professional legal advice. If you’re an employer faced with tough decisions, we can give you help and guidance too. Please contact Zoe on 0203 858 9765 or email firstname.lastname@example.org. Mulberry’s has offices in Brighton and London.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.