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The draft Government Code of Practice on dismissal and re-engagement - What next?

The Government is currently reviewing opinions on a draft statutory Code of Practice on Dismissal and Re-engagement (often referred to as "fire and rehire"). The consultation opened late January and closed mid April 2023 and no doubt the job now will be for government ministers to wade through the responses, and to analyse and consider the comments put forward by interested parties.

Background

The proposal for a new Code of Practice emerged in the wake of the COVID-19 pandemic and the widespread disruption that brought some business activities to a halt. More recently, employers and employees alike have witnessed first-hand the new challenges arising from the cost-of-living increase and soaring inflation. These challenges have placed intense pressure on all businesses and sectors regarding their operations and economic rationale.

In recent years, specific cases of 'fire and rehire' have been widely reported, bringing significant media attention to the practice, such as the controversial dismissals made by P&O Ferries in 2022. In light of the upturn in the use of this practice the government directed ACAS to assess the 'firing and rehiring' practices and their subsequent guidance found that the practice had gained prevalence during the pandemic, with employers using the threat of dismissal as a pressure tactic during negotiations.

Whilst the education sector is not known for widespread dismissals and re-engagements, they can sometimes factor into restructure and/or efficiency plans for Colleges and Universities, where the alternative to making staff cuts is wholescale changes to terms and conditions of employment. It is therefore useful for institutions to be aware of the potential changes, especially before entering into any trade union negotiations.

When will the proposed Code apply?

If implemented, the Code will take effect where an employer seeks to vary employment terms and conditions should the prospect of dismissal and re-engagement occur. Therefore, the Code aims to serve as practical guidance in situations where an employer:

• Considers that it wants to make changes to its employees' contracts of employment; and
• Envisages that, if the employees do not agree to those changes, it might dismiss them and either offer them re-employment on those new terms or engage new employees to perform the relevant roles on the new terms.

It is anticipated that the Code will apply regardless of the number of employees affected, or potentially affected, by the employer's proposals. It is worth noting however that the Code is unlikely to apply to a genuine redundancy situation, where an employer anticipates terminating contracts for reasons of redundancy as outlined in the Employment Rights Act 1996.

In practice, the Code itself will not confer new legal obligations on employers, and a failure to observe it will not, by itself, render an employer liable to proceedings. However, an unreasonable failure on behalf of an employer or employee to follow the guidance will permit an employment tribunal to uplift or decrease an award of compensation. This applies to claims brought in Schedule A2 of the Trade Union and Labour Relations (Consolidation) Act 1992 and is similar to the practice employed by tribunals in considering compensation for unfair dismissal claims where a party has allegedly failed to follow the ACAS codes of practices on handling disciplinaries and grievances.

What do the proposals mean for Colleges and Universities?

During the current economic climate, the government has publicly reaffirmed its view that it is for an employer to make their own necessary economic decisions for the benefit of their business. Despite this, employers must take heed of their responsibilities when part of that decision-making means that they must seek changes to employment contracts and the potential conflict which may arise as a result. This is especially the case for public sector and quasi-public sector bodies who will be expected not only to comply with any applicable government codes and guidance, but also in accordance with the seven Nolan principles. Arguably, employing the practice of dismissal and re-engagement goes against these principles hence why for many institutions it would be considered only as a last resort.

Overall, the draft Code endeavors to ensure that employers takes all reasonable steps to explore alternatives to dismissal, and engage in meaningful consultation with relevant parties in good faith. Whilst the practice has not been abolished, threats of dismissal must not be used to put undue pressure on employees to accept the newly proposed terms. Arguably the Code simply reflects what is already taking place in the FE and HE sectors, especially give the extent to which the workforces in it are heavily unionised and the obligations conferred on colleges and universities by way of collective agreements.

The consultation did invite comments on the extent to which parties have to exchange information when considering firing and re-hiring, the stages at which the information has to be provided (i.e whether "as early as possible" is specific enough) and also whether interested parties considered that the draft Code would have any impact on industrial relations, so it will be interesting for those in education to review the response on these points. In the meantime, however employers in the sector should be reassured that the draft Code does not at this stage include any new novel or onerous obligations on employers that are not already being discharged by the vast majority of education providers.

Whilst the Code has not been implemented and is currently in the post consultation phase, it is useful to have regard to its pending status and it may be that where employers are using other means to effect changes in the workplace, the Code can be referred to in negotiations.

If you are considering making changes to your employees' contracts of employment and need further information regarding this article, or any other issues which arise, please do get in touch.

For more information contact Laura McHugh in our Education department via email or phone on 0161 918 0008. Alternatively send any question through to Forbes Solicitors via our online Contact Form.

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