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ACAS Guidance on dismissal and re-engagement

ACAS has issued updated guidance on dismissal and re-engagement, which can be accessed here.

What is dismissal and re-engagement?

Dismissal and re-engagement, also known as “fire and re-hire”, is a common (and legal) method that employers can utilise to implement changes to employees’ terms and conditions of employment. Where employees refuse to expressly agree to a change, or where employers do not have the contractual right to make changes, it is likely that terminating the existing contract on notice and offering continued employment on new terms is an employer’s best option.

That being said, dismissal and re-engagement comes with legal risks. This is because the termination of the original contract amounts to a dismissal in law and can therefore give rise to claims of unfair dismissal in respect of employees who have 2 or more years service. This is even the case where employees accept re-engagement on the new terms, albeit the chances of a significant damages award in favour of the employee are slightly less in those circumstances.

The Covid-19 pandemic has shone a light on the increasingly controversial tactic of dismissal and re-engagement as there have been several high-profile disputes concerning the same, such as British Airways and British Gas.

It has been suggested that under current law, the balance of power lies firmly with employers. In October 2021, the government blocked legislation that would have made it unlawful for employers to dismiss employees and re-engage them on worse terms.

The government instead turned to ACAS to provide further guidance for employers on how to avoid the need to dismiss and re-engage employees. ACAS published that guidance earlier this month (November 2021).

ACAS Guidance – Key Points

The key points can be summarised as follows:

  • Reminding employers of the need to inform and consult with staff or their representatives, and to provide information about the rationale for the changes and the likely impact if changes are not accepted;
  • Explaining why genuine consultation is important and how it may help obtain employee agreement to the proposals, or reach a compromise that both the employer and employees can support;
  • Warning employers not to use threats about what will happen if the proposed change is not agreed, particularly at an early stage of discussions;
  • Suggesting that managers and employee representatives are given training on consultations and negotiations to ensure that discussions are effective;
  • Indicating that employers should continue to explore options and alternatives to the proposed changes “for as long as is reasonably possible”;
  • Reminding employers that dismissing and re-engaging employees in order to make the proposed change should be viewed as a last resort; and
  • Offering collective conciliation through ACAS to try to reach an agreement where an employer is negotiating with a union.

What Next?

Ultimately, ACAS guidance is non-binding and does not change the law. Notwithstanding that, the importance of adhering to the guidance should not be underestimated as it emphasises the value of engaging in full and constructive dialogue. Effective dialogue may make agreement more likely, thereby avoiding the need to dismiss employees at all.

If employers are still in the position where dismissal and re-engagement is unavoidable, their position will be strengthened having complied with ACAS Guidance. Risks to reputation and staff morale will be significantly mitigated if employers can demonstrate that they generally turned to dismissal and re-engagement as a last resort after they had fully considered any alternatives suggested by its staff.

Furthermore, in the worst-case scenario of being involved in an Employment Tribunal claim, employers’ positions will also be strengthened having followed ACAS Guidance as it is likely that an Employment Tribunal will be more sympathetic to an employer’s position in such circumstances.

How can Bermans help?

At Bermans, we have extensive experience of successfully negotiating contractual changes, implementing dismissal and re-engagement in the appropriate circumstances, or defending employers in Employment Tribunal proceedings arising from dismissal and re-engagement.

If you want more information about the items raised in this article, or about employment law generally, please contact:

Adrian Fryer, Partner & Head of Employment

t: 0151 224 0539