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Termination and re-engagement under scrutiny

The discussion regarding the legality and morality of termination and re-engagement (currently known as ‘fire and re-hire’) practices is not a new concept. Over the past several years, Trade Unions and several Members of Parliament have sought to bring about change by outlawing such practices.

In light of the world today, where both employers and employees have had to endure the continuing pressures of the pandemic and its aftermath, this movement has now found a new lease of life.

Typically, termination and re-engagement is an option employers consider when the employer seeks to change the terms of the contract of employment for varying reasons, but mostly when the existing terms and conditions are no longer fit for the purpose they were originally intended for, perhaps due to a change in business or financial concerns, and the employee disagrees with those proposed changes. The employee is generally then dismissed for “Some other Substantial Reason”.

Following termination of their role, the employee is “re-engaged” on new and agreed terms and conditions of employment. Naturally, if the employee does not agree to the proposed terms and conditions then their employment will come to an end with notice.

In an open letter to the Prime Minister, the trade union, Unite, have estimated that “one in ten UK workers” have experienced the threat of termination and re-engagement stating that “it is rarely, if ever, implemented as a response to business need…”.

Headlines have recently reported MP and trade union action against British Gas/Centrica in December 2020, Tesco in May 2021 and more recently Weetabix and Argos in respect of their ‘fire and re-hire’ practices. They have generally been criticised for offering unfavourable terms and the practice of termination and engagement has been dubbed as being “bully-boy tactics”.

Whilst these news reports do highlight some concerns, the context and rationale for the proposed termination and re-engagements are not overly apparent. For example, cutting car allowance for staff when they benefit from remote home working with less expected travel is arguably a proportionate proposal which in turn will support a business’ continuing survival during what is a difficult economic climate.

In practice, the law requires employers to follow a full and fair procedure which involves a thorough consultation process with its affected employees. Termination and re-engagement should be the last resort. In the current economic climate with companies being on the brink of collapse and to aid future growth and stability for the workforce, more now than ever, there is a genuine and required justification for termination and re-engagement to be considered as an option.

We eagerly await the Government’s response, however, given the wide press coverage employees are likely to be far more resistant to any proposed changes and bespoke legal advice is necessary to avoid and mitigate the potential pitfalls.

If you are considering termination and reengagement our highly experienced Employment and HR team is on hand to assist and will be able to explore this with you and your business further – please do not hesitate to contact us for more information.