‘Firing and Rehiring’ – New ACAS Guidance on Contractual Changes Published

ACAS has recently published new guidance on employers’ responsibilities when making changes to employment contracts in place with their workers following the Government’s recent consultation on firing and rehiring practices.

Where an employer wishes to vary an individual’s contractual employment terms, such changes will need to be agreed with the individual (or in some circumstances, with employee representatives or a trade union). If an employer proceeds to make a change unilaterally, or if they use the practice of firing and rehiring, they may then be exposed to risks of legal claims, damaging the employment relationship and causing reputational damage.

The new guidance published by ACAS aims to assist employers who propose to make a contractual change. The guidance makes clear that the practice of firing staff and then rehiring them on new contractual terms is a high-risk strategy that should only ever be used as a last resort, and employers are encouraged to thoroughly explore all other options first. A brief summary of the new guidance is set out below.

Making a change

First, the guidance encourages employers to consider whether a contractual change is actually needed, and suggests that the issue that the employer wants to address may be solved by other means. However, where an employer identifies that a contractual change is needed, the guidance sets out some options to consider.

If an employer wishes to vary the terms of employment of a specific employee, the employer should discuss and attempt to reach an agreement with that employee directly. If, on the other hand, a proposed change will affect a number of workers, an employer may instead (or in some circumstances, be obliged to) consult with employee representatives or a trade union to agree a change.

In any event, the guidance makes clear that staff should be provided with full information prior to any consultation regarding the proposed change, including who will be affected, why the changes would be needed and the timeframe for implementation. Staff should also be provided with sufficient time to consider changes, and ACAS encourages employers to work together with their staff to come to a suitable solution.

Some employment contracts may also allow for flexibility over certain terms, for example, the location that staff are required to work at. However, any change made under a flexibility clause will need to be implemented reasonably, otherwise the employer runs the risk of breaching the employment contract.

If agreement cannot be reached

If, after consultation, an agreement cannot be reached, the ACAS guidance sets out that it may be possible for an employer to introduce a change by either serving notice that the change will be taking effect from a certain date, or by firing and offering to rehire staff on new terms.

However, the guidance notes that this can expose the employer to significant risks, including breach of contract claims, unfair dismissal claims, damage to the employment relationship, loss of valued employees, reputational damage and, in some circumstances, industrial action. On top of this, if an employer decides to proceed to ‘fire and rehire’ 20 or more employees, obligations to engage in collective consultation will also then likely be triggered which then obliges an employer to engage a consultation exercise for at least 30 days.

ACAS therefore recommends that unilaterally imposing changes, or firing and rehiring, should only ever be used as last resort options, and employers should take the time to properly explore all other options before proceeding down this route.

Documenting a change

If an agreement is reached to vary terms of employment, the agreement should then be properly documented in writing. This not only provides clarity to the parties, but may be a legal requirement if the change relates to something that must legally be provided to an employee as part of their ‘employment particulars’. This would include, for example, their job title, job description, location, pay, working hours and holiday entitlement.

Although guidance from ACAS is always welcome, this new guidance seems to be a reminder of good practices as opposed to anything new. As set out above, there are different in ways in which an employer can achieve a variation to an individual’s employment terms and conditions, and the guidance does make clear that there is varying exposure to risk depending on the method used.

Where an employer is considering making changes to the terms of employment of their staff, changes will need to be implemented reasonably and legal advice should be sought as to the rights and obligations in the specific circumstances. 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.

Alistair McArthur
Partner, Head of Employment
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This reflects the law and market position at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought in relation to a specific matter.

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