Fire and rehire
The pandemic has made it necessary for some employers to seek to change their employees’ terms and conditions of employment, for example in order to allow the employer to take advantage of the furlough scheme or to reduce employees’ hours and pay to deal with an unexpected downturn in business.
Certain employers have implemented those changes by “firing and rehiring”. As a result, fire and rehire practices have received media attention recently and some politicians have called for it to be banned.
The so-called fire and rehire tactic is a method of varying contractual terms of employment by dismissing employees and then re-engaging them straight away on new terms if they will not agree to the change by consent. This practice essentially forces employees to choose between accepting new, usually less favourable terms or losing their job. It is therefore seen by some, to be a controversial practice.
Acas, the independent employment advisory service, recently looked into the use of fire and rehire practices. It identified that firing and rehiring can help reduce redundancies but it is unpopular with some people who see it as an unacceptable practice aimed at reducing workers’ terms and conditions.
In the recent case of Khatun v Winn Solicitors it was decided that, where an employee refuses to accept new terms and is ultimately dismissed, that dismissal may be fair where there are sound, good business reasons for seeking to vary an employee’s terms of employment. However, it is important to approach any resistance to the new terms reasonably or the dismissal could be unfair (as it was in this case).
Ms Khatun was employed as a solicitor by Winn Solicitors (WS).
In March 2020, just before the first lockdown, WS decided to take action to deal with the anticipated downturn in work caused by the pandemic. It decided that 50% of its staff would be furloughed and the remaining 50% (which included Ms Khatun) would be required to agree to new terms which provided that they could be furloughed or put on reduced hours (which would equate to a 20% reduction in salary) as required by the business. Ms Khatun was told that these new terms were non-negotiable and was threatened with dismissal if she did not agree to the new terms.
Ms Khatun refused to agree to the new terms on the basis that she was continuing to deliver in her job and had also taken on additional work from her furloughed colleagues. She also said she felt uncomfortable allowing WS to reduce her pay. As a result of her refusal, she was dismissed.
The Tribunal held that her refusal to agree to the new terms amounted to “some other substantial reason” (one of the five potentially fair reasons for dismissal) which justified Ms Khatun’s dismissal. However, Ms Khatun succeeded in her claim of unfair dismissal overall as the Tribunal found that her dismissal was not reasonable in the circumstances and there were many flaws in the procedure carried out by WS leading up to the dismissal.
The Tribunal criticised WS for the absolute lack of consultation with Ms Khatun before her dismissal. Employers looking to vary contractual terms for sound business reasons and considering using dismissal as a tool to implement those variations should first give due consideration to the existing binding contractual relationship by engaging with a concerned employee in a meaningful way, discussing their concerns and reasonably considering all alternative options to dismissal. The level of consultation required for a fair dismissal will vary depending on the circumstances of each case. Employers should also offer a right to appeal the decision to dismiss as the Tribunal was critical of WS’s failure to do this.
Employers should note that, whilst this case indicates that a dismissal for an employee’s refusal to accept new contractual terms may potentially be fair, this is a first instance decision which is not binding on other tribunals. In addition, fire and rehire is seen to be a risky, unpopular practice and its legality is currently being debated in Parliament.