Following a trend of ‘fire and rehire’ tactics used during the pandemic, employers are now under more scrutiny than ever when it comes to implementing changes to employees’ terms and conditions of employment.
Over the last two years, employers have had to make vast and significant changes to their day-to-day operations. Many employers have been forced to reduce their workforce and/or alter the terms of their employees’ contracts, in order to survive the economic effects of the pandemic.
It goes without saying that employers should think carefully before making changes to employees’ contractual terms of employment. Before proposing a contractual change, it is advisable for employers to first consider the issue at hand and whether a contractual change is in fact required to solve it. As a result of a number of high-profile cases in the last year, employers are now facing increased scrutiny when making changes to its employees’ contractual terms of employment.
In some circumstances, employers will be required to consider making changes to its employees’ contracts if, for example, contracts must be updated to reflect new laws or regulations. Other circumstances where an employer might want to update its employees’ contractual terms include where an employee’s job role has changed, or to specifically introduce new terms and conditions (such as contractual redundancy pay).
The approach that an employer takes to change the employees’ contractual terms will depend on several factors, such as the number of employees that will be affected by the contractual change. For example, if the change being considered will only affect one employee, an employer might want to have a discussion to try and agree the change with them directly. Alternatively, where the proposed change will affect a number of employees’ contracts, it may be more appropriate and effective to discuss this with any employee representatives as well as individual employees.
The fire and rehire process is one which should be viewed as a last resort. The approach enables employers to make changes to its employees’ contractual terms by way of dismissal and re-engagement on new terms. High profile cases of fire and rehire during the pandemic (for example British Airways and Centrica (British Gas)) have prompted a rethink on how employers should exhaust all other options, before pursuing the fire and rehire approach. While these disputes were both settled through trade union involvement, they point to an increased level of scrutiny that employers are under when it comes to trying to change employees’ contractual terms.
Tesco is another employer that has recently faced tough scrutiny for its attempt to fire and rehire a number of its employees. Tesco proposed to remove the contractual right to Retained Pay by terminating its employees’ contracts and rehiring them on new terms without Retained Pay. The High Court held that it was an implied term of the employees’ contracts that Tesco could not terminate the contracts to remove the Retained Pay. Consequently, the High Court granted an injunction to prevent Tesco terminating employees’ contracts for the purpose of removing or diminishing the right of the employee to receive Retained Pay. This decision by the court further emphasises that employers are subject to greater scrutiny when making changes to its employees’ contractual terms of employment.
While certain changes to employment contracts can bring benefits to employees, others can also present significant risks. Before proposing to change its employees’ contractual terms, employers need to carefully consider the approach it takes. Recent cases have highlighted a growing shift towards employees successfully asserting their rights under their existing contractual terms and conditions of employment. As we emerge out of the pandemic, employers are and will continue to be subject to an increased level of scrutiny when it comes to making changes to employees’ contractual terms of employment.
For further information or to discuss the issues raised by this update, please contact our Employment Group on 0118 977 4045 or employment@herrington-carmichael.com.
This reflects the law at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought as appropriate in relation to a particular matter.
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