Organisations are facing a period of operational disruption, increased supply costs and loss of revenue. Employers have had to react, adapt and effect change to their processes.   

Where contractual changes to employment terms and conditions have been sought, organisations can reach agreement with employees, either through individual or collective discussion. 

But the context of heightened disruption and business challenges has meant that some employers have been forced to consider firing and then rehiring their employees where an agreement can’t be reached to vary the employment contract. In these situations, organisations will dismiss an employee from their current contracted employment and offer them employment under new terms – often less advantageous for the employee, but which are believed to be essential for the business. 

When faced with difficulties, employers should first look to bring about a mutual agreement to change contracts through effective communication, explanation, and consultation with employees. This can be achieved if employees understand the immediate and pressing business need for change; for example, to reduce costs and/or improve efficiency to compete, or indeed survive. 

But if they can still not obtain employee consent to change, an employer may find no option other than to fire and offer to rehire, especially where significant business impact or business survival may otherwise be a realistic consequence. 

Reasons that an employer might seek to change the contractual terms and conditions of their employees may stem from a need to: 

Ideally, having employees agree to any variation to their contract of employment is the best outcome, where the business rationale for the proposed change is explained through meaningful consultation that is compliant with statutory consultation requirements as appropriate. 

Agreed variations to contracts of employment can be achieved by: 

Employers should review the terms of the existing employment contract to see if there is a flexibility clause that would allow variation within the current terms. 

However, clauses along the lines of: “The company reserves the right to make reasonable changes to your terms and condition of employment” would only suffice for minor contractual changes to be made – for example, a minor adjustment to tasks within a job role or a minor change to working hours. 

Such a clause is unlikely to be accepted in tribunal to be relied upon for any fundamental contractual change such as reduction in pay, significant variation of working hours, reduced contractual benefits and so on without the consent of the employee or unless a variation clause specifically and unambiguously anticipates the proposed change. The employer would also be required to give appropriate statutory or reasonable notice prior to the change being affected.

Where an employee is not willing to accept the proposed changes, an employer may choose to impose it on them as a unilateral variation of contract. This is a risky process for an employer to follow for the reasons outlined below: 

Continuing to work under new terms 

If an employee is not willing to accept a proposed change but the employer imposes it on them anyway, and the employee then continues to work under the new terms and conditions without making their objections known to the employer, after a period of time (usually months rather than weeks) the employee could be deemed to have impliedly accepted the change, and it would then be incorporated into their contract of employment. Exactly how long an employee must have continued to work before being deemed to have impliedly agreed depends on the facts of each case. 

Employers should not assume, however, that an employee has accepted a change just because they have not specifically objected. This is especially the case regarding changes that do not affect the employee for some time, such as changes to sick pay, maternity pay or redundancy entitlement. 

Example: 

In the case of Rigby v Ferodo (1988), wages were cut by 5% to prevent closure. Rigby made it known that he did not accept the reduction but continued to work for over a year. He then claimed the amount he had lost (£30 a week) during that period. The House of Lords decided there had been a repudiatory breach of contract by the employer and the employee was entitled to claim his shortfall in full. 

This case illustrates that continuing to work is not sufficient to constitute an implied acceptance of the variation, and wages reduced without consent meant that employees were entitled to claim the full amount of their continuing loss. 

Working under protest 

If the employee works under the new terms and conditions but under protest, in which case there is no acceptance by the employee, the employer would still be in breach of contract and the employee can issue a claim for this breach. 

If the breach of contract is sufficiently fundamental, the employee could resign as a result of the breach and claim constructive unfair dismissal before an employment tribunal (assuming they have the necessary qualifying service) as well as pursuing a breach of contract claim. There will be a limit on the time an employee can continue to work under protest and keep open the option of resigning and claiming constructive dismissal. An employee may also claim that there has been an unauthorised deduction from their wages if the change affects pay. 

As mentioned, apart from employment tribunal claims, an employee can bring a claim for breach of contract, but in a civil court. They will have six years from the date of the breach as long as the employee has made it clear that they do not accept the terms and are working under protest. 

Refusal to work to the new terms 

An employee who refuses to work to the new terms will force the employer to either consider dismissal (with the employee able to bring a potential unfair dismissal claim) or else allow them to continue on their existing terms. 

• Have clarity and purpose in your business planning and rationale about the “why” and “what” you want to achieve and the likelihood and business impact of the risk of not achieving the change.
  
• Communicate and consult with employees outlining:
  • WHERE we have been/what we did
  • WHERE we are now/challenges faced
  • WHAT we propose we need to do going forward
  • WHY we believe these proposals are needed
  • HOW we propose to implement. 

If the employee accepts the new terms, their employment will continue under the new terms and their continuity of service will be preserved. 

If the employee does not accept the new terms, their employment will terminate and there is a risk that the employee could bring a claim for unfair dismissal (subject to having two or more years of service, or with less service if the claim could be made to be an automatic unfair dismissal, such as discrimination). It will be for the employment tribunal to determine whether the decision to dismiss based on the business rationale was fair and reasonable in the circumstances and for a genuine and pressing business reason. 

If the trade union accepts the terms on behalf of the employee but the employee objects and does not agree to be bound by the changes, any action the employee may be able to take will depend on whether there was a collective agreement formally incorporated into the contract of employment. If it was incorporated, including reference to changes “as from time to time” then the employee will be bound by the changes.  

Allowed, but… 

The concept of “fire and rehire” or to dismiss and re-engage has received increased attention, especially during the pandemic, as a number of large, household-name companies, together with other smaller businesses, have invoked or threatened to invoke the process.  

What the law permits an employer to be able to do and what an employee believes is “right” or acceptable can often be the subject of much debate and dispute among employers, employees and trade unions, with differing opinions as to whether the practice should actually be allowed. The UK Government announced in March 2022 that a new statutory code will be introduced to outline how businesses must hold fair, transparent and meaningful consultations on proposed changes to employment terms. The aim is to: “Clarify and give some legal force to government expectations that employers should behave fairly and reasonably when seeking to change employees’ terms and conditions.” We will add more information about this new code once it becomes available.  

“Fire and rehire” is a legally allowable practice and can support businesses where there are serious, genuine and pressing reasons to make changes to terms and conditions. Employers need to conduct thorough consultation and consider alternatives before turning to this as an absolute last resort when agreement cannot be reached with an employee. 

Unlike redundancy, the starting point to consider “fire and rehire” does not need to be because of a reduced requirement for work.  

An employer deciding whether or not to “fire and rehire” must weigh up the following: 

• Is there a genuine and pressing business need that could confidently be defended in tribunal, which goes beyond what is believed to be “wanted”?
• Has full and meaningful consultation taken place and every other option and consideration been explored before making the final decision to “fire and rehire”?
• Could temporary variations to the contract be agreed as an alternative?
• Has there been any compromise offered or acceptable “sweeteners” that could be offered such as a monetary payment, an additional day’s holiday etc to reach agreement?
• Has consideration been given to ensure that changes to terms and conditions required will not have any direct or indirect discrimination risks?
• Has there previously been a TUPE process affecting employees, where changing terms and conditions would have to comply with the TUPE regulations which make changes to terms very difficult?
• Have other wider and commercial factors been considered, including the potential of: 

In other words, deciding to invoke “fire and rehire” can be seen as taking the “nuclear” option.  

It is recommended that very serious consideration be given to all of the above before an employer takes such action as to “fire and rehire” – and even then only as an absolute last resort. 

Legal reason for dismissal – some other substantial reason (SOSR) 

In situations where there has been refusal to accept changes to terms and conditions of employment and an employer believes they have: 

Such a dismissal would have to be with notice. 

To be potentially “fair”, a dismissal must be for one of the following five reasons: 

Legal framework 

There are various legal factors an employer must consider before contemplating or entering into a “fire and rehire” process: 

Wrongful dismissal (contractual obligation). Irrespective of length of service, statutory or contractual notice, whichever is the longest, must be served to avoid a claim of wrongful dismissal or breach of contract. 

Unfair dismissal (statutory obligation). There is a two-year qualifying period for an employee to make a claim for unfair dismissal unless the individual can make a claim for automatic unfair dismissal. 

Consultation. Meaningful consultation must take place with employees or their representatives, irrespective of the numbers affected by any change: 

Protective awards of up to 90 days’ pay per employee can be awarded for failure to comply with consultation requirements. 

Employees dismissed through a “fire and rehire” process would be treated as redundant for the purposes of collective consultation but would not be entitled to redundancy pay. 

Whether a decision to dismiss was fair and whether the employer acted reasonably in dismissing for SOSR would depend on the wider matters that led to the decision taken: 

Example: The case of Slade v TNT Ltd is an example of where the employer was able to demonstrate, to the tribunal’s satisfaction, that the need to cut costs through the removal of a contractual bonus was held to be fair. 

As already reiterated, “firing and rehiring” should be a last resort and avoided where possible. Employers should consider the following to stave off the need to “fire and rehire”. 

Employers can avoid “firing and rehiring” through open and transparent discussion, where the challenges faced by the business are explained and the issues raised by employees understood, underpinned by a genuine intent to seek an acceptable agreement. At the very least, having an honest discussion will minimise the consequences of firing and rehiring, and perhaps gain acceptance from others. 

Keep talking and try to find a way to reach acceptable agreement through to the very end, recognising that many “11th hour” agreements are reached with employees. However, don’t set out with a last-minute deal as the intent. 

Review the example scenarios below for more. 

If, after extensive communication, consultation and reasonable compromise have taken place, there is still refusal to accept the changes, the following situations could be considered justifiable for “fire and rehire”: 

Managing people through changing times can be difficult. Much emphasis needs to be placed on explaining the important “whys” and “whats” of the change. 

What is also important is “how” the process is carried out. Managers and those responsible for making changes need to be considerate, empathetic and self-aware in communicating with employees and conveying their aim of seeking employee agreement. “Standing in the shoes” of employees being consulted with and having a high level of emotional intelligence can go a long way to achieving change in the most effective way. 

Ultimately, employees may not have wanted or be happy with the outcome of a process that changes their terms and conditions. However, if they understand the reasoning, and believe the manner the process has been carried out was fair, respectful and aligned with the values of the business, there is an improved chance of being able to move forward with the new changes in a better, more open and transparent employee relations climate and an improved organisation culture for the business. 

A wine and beverage company was impacted during the height of the COVID-19 pandemic. Its business operation was “stop and start”. Although it was able to take advantage of the furlough scheme for some employees during the year, it was unable to claim the grant for others who couldn’t be furloughed because of their joining dates. 

The directors of the business have since carried out a business review and identified that they need more robustness and protection in the company should something similar happen again, particularly if furlough may not be available in the future. They want to minimise the risk of having to make employees who they value redundant, having spent money on their training, for what could be a short-term impact. 

They now want to introduce short time working and lay off clauses to the terms and conditions of all their employees, ultimately as a means to avoid knee-jerk redundancies and to be able to protect jobs where possible. 

The directors are unsure whether their employees would accept the changes, fearing what they think the changes could mean for them. 

A customer service team in a large, family-owned insurance company has good, long-serving employees, many of whom have become friends over the years. They have contracts of employment that have not been reviewed or updated for many years, and traditionally all employees in the department have a contractual clause entitling them to a mid-morning paid break at 10.45am and a mid-afternoon paid break at 3pm – both 15-minutes in duration – when they leave their offices en masse to go to the canteen. 

This has started to become more problematic for the company, as having all employees leave for the 15-minute break at the same time is causing serious operational issues, especially in customer-facing teams, where the allocated times can be peak times for customer queries. 

In the past, the directors have tried to discuss their concerns with employees. They’ve proposed removing the two 15-minute paid breaks, buying out the benefit by increasing employees’ salaries by 30-minutes per day and installing coffee machines in the office. This allows employees to take reasonable time to enjoy a coffee at their desk on an ‘as-and-when’ basis based on operational need, rather than having all employees on break at the same time. Unpaid lunch breaks of 30 minutes would continue as per the contract. However, employees did not accept the proposals in the past and, as a result, the employer took no further action at the time, since new orders were coming in and it was ‘never the right time’ to risk experiencing what might turn into a conflict. 

The situation is now having a direct impact on service-level agreements and is causing customer complaints. Also, the directors have considered the cost of the outsourced catering company they engage and determined that, while they still plan to cover the costs for proposed lunch breaks, a better solution would be to install and provide free coffee machines in the offices and not use the canteen for morning and afternoon breaks. 

The directors now propose to commence a formal consultation process to consider the removal of the fixed paid breaks and stop the serving of drinks during the morning and afternoon. 

A logistics company employs a number of drivers on traditional Monday to Friday, 9am to 5pm contracts of employment, working 37.5 hours per week. 

Given the cyclical nature of their work, with peaks and troughs each week and at different times of the week, the company is finding that it is frequently asking drivers to work overtime on some days and weeks but at other times not having enough work to give them. As a result, it’s failing to meet service levels at their peak times and the cost of the overtime payments is reducing the margins it makes. 

The drivers are happy with the current arrangements. They have defined fixed hours, regular and expected premium-rate overtime payments on the days known to be busy that they agree to work when asked and can expect to be paid for idle hours when there is no or reduced work. 

The directors have had a shock when they have costed out the chargeable work and the amount they are paying in overtime premiums, plus the cost of no productivity on some days, where they are still paying for the time. 

They’ve looked at the work demand, and identified that if they were to introduce a new working pattern of 150-hours to be worked over a four-week reconciliation period with a window of operation between 7am and 7pm Monday to Friday (which still equates to an average of 37.5 hours per week over four weeks, though some weeks would have more hours and other less), they would be able to roster the working hours for longer days on the busy days. This means there would be more rostered non-working days for when delivery work was known to be quieter, enabling the drivers to have guaranteed days off while still receiving the same contractual pay. 

By proposing to continue paying monthly – based on annual salary divided by 12, but now with 13 reconciliation periods of four weeks rather than 52 reconciliation periods of one week – the company would reduce its overtime costs. The directors expect that the drivers may not accept what is being proposed and would be happy to continue with the current arrangements. However, the directors have forecast that to continue following this practice would, in a few months, cause the company to be make losses. 

A leading Scottish university made major changes to the employment terms and conditions of its facilities staff through effective consultation and agreement with recognised unions.   

Needs prompted by the pandemic  

The university needed to adapt how its buildings were being used, partly due to changes in ways of working caused by the pandemic. This meant there was a growing need for teachers and students to use space more flexibly, including 24-hour access. This required thinking differently about how janitorial, cleaning, estates and security staff in its facilities function worked across a whole range of new areas, covering compliance, security, operations, technical services and frameworks and contracts.   

Rethinking roles  

The university designed new ways of working to improve the customer service for anyone using the buildings and associated services. It also made changes to roles to create more fixed work patterns, aimed at enhancing teamwork, career development and improving work–life balance, while reducing working long hours and excessive overtime. 

All this required significant changes to the terms and conditions of 600 staff employed across the function and meant some traditional jobs were no longer needed. For example, janitorial roles evolved into a facilities services-type job, which was more multi-skilled and included providing enhanced AV support.   

About 75% of people in the function transitioned into their new positions without difficulty and the changes created more roles overall than previously existed. Nonetheless, between 150 and 170 jobs were effectively either made obsolete or resulted in new roles offering a reduced take-home pay.  

Consultation and a range of options  

However, through meaningful consultation with the three recognised unions whose members were affected, the university developed a number of approaches to support staff adversely impacted by the proposals, which ensured changes to terms and conditions were achieved through agreement.  

Some staff were able to benefit from a ring-fenced recruitment and development plan. This meant they could move into one of the new roles at a higher grade linked to a development plan to enable them to develop the new skills they required for the new role.   

The university also provided support for employees who wanted to move into management roles to ensure they had a clear career pathway and pay progression.  

Other staff were provided with pay protection for a period of time, which meant they did not have to take a pay cut in their new role until they reached retirement age and could access their pension.   

A further option for employees was the chance to develop a completely new career by applying for jobs in other parts of the university.  

For employees who did not want to take up the alternatives offered, there was an enhanced voluntary redundancy scheme.  

The university’s HR director said that the long-lasting partnership with their recognised unions had provided the foundation for meaningful consultation and agreement over the changes.   

“Both sides work very hard to maintain trust. We might not always agree, but where we don’t, we find a way forward through dialogue. Our reputation as an employer is very important to us, so trying to force through these changes without agreement was never an option,” she said.