Recent Developments in Fire and Rehire Practices: What Employers Need to Know

In our previous blog post we discussed the Code of Practice on Fire and Rehire and its implications for protecting employee rights. Today, we are exploring a recent legal development that further emphasises the importance of fair employment practices.

The UK Supreme Court Upholds Injunction Against Fire and Rehire

Tesco, recognised the Union Shop of Distributive and Allied Workers (USDAW) as the sole representative and negotiating trade union for certain staff at their distribution centres. As part of a reorganisation in 2007, Tesco agreed an enhanced pay arrangement (retained pay) as an alternative to a lump sum redundancy payment and as an incentive to staff to relocate to other sites. This was in order to ensure that it did not lose all of its existing experienced employees through redundancy at a critical time when it was expanding and opening new distribution centres.

In January 2021, Tesco announced its intention to remove the retained pay and employees were informed that if they did not agree, they would be dismissed and re-engaged on the same terms but with their retained pay rights removed. The employees did not agree and sought an injunction, from the High Court, to stop Tesco from removing their contractual entitlement to retained pay through dismissal and re-engagement on revised terms. 

In February 2022, the High Court granted an injunction preventing Tesco from using 'fire and rehire' to remove employees' contractual entitlement to enhanced Retained Pay. 

Tesco appealed, and the Court of Appeal overturned the decision, ruling that no implied term prevented termination. 

In July 2022, the Supreme Court restored the High Court's injunction, stating that the employer could not terminate contracts solely to remove Retained Pay.

This decision underscores the legal risks associated with fire and rehire practices and highlights the need for employers to approach contractual changes with caution.

The court’s decision highlights that fire and rehire is not a straightforward solution for businesses looking to enforce contractual changes, especially when those changes negatively impact employee rights.

It further underscores the risk businesses face when attempting to alter employment contracts without proper consultation. Employers must tread carefully when navigating these situations, as failure to do so can result in significant legal challenges, potential damage to employee relations, and reputational harm.

Start-ups and SMEs often face the challenge of balancing business needs with employee rights, especially when needing to make urgent changes to employment terms. However, the legal landscape is clear: firing and rehiring to enforce new contract terms can be highly risky. Ensuring fair, transparent consultation processes and seeking legal guidance is crucial to avoid potential injunctions or disputes.

Key Takeaways for Employers

Consultation is Crucial: The court's decision emphasises the importance of genuine and meaningful consultation with employees before implementing significant changes to terms and conditions

Legal Risks: Employers who fail to follow proper procedures may face injunctions and potential claims for unfair dismissal.

Alternative Approaches: Companies should explore all possible alternatives before considering fire and rehire tactics.

How Protean HR Can Help Start-ups and SMEs

Navigating the complexities of employment law and best practices can be challenging, especially for start-up and small to medium-sized enterprises (SMEs). This is where Protean HR's expertise becomes invaluable. We specialise in helping start-ups and SMEs navigate complex HR issues, including contract variations and fire-and-rehire practices. Our expertise ensures that you stay compliant with the latest regulations while maintaining strong employee relationships. We provide hands-on support for managing change, implementing fair consultation processes, and guiding you through legal complexities to minimise risk.

Whether you need strategic advice or on-the-ground HR support, Protean HR is your partner for navigating these challenges. We can help with:

Expert Guidance: Our team of HR professionals stays up-to-date with the latest legal developments and can provide tailored advice on how to approach contractual changes fairly and legally.

Risk Mitigation: We help identify potential pitfalls in your HR processes and develop strategies to minimise legal and reputational risks.

Employee Relations: Our expertise in fostering positive employee relations can help you maintain a productive and engaged workforce while implementing necessary changes.

Why Choose Protean HR?

• Specialised Knowledge: We have in-depth understanding of employment law and best practices that can be leveraged by start-ups and SMEs.

• Customised Solutions: Our approach is tailored to your unique business needs and challenges.

• Cost-Effective: We provide high-quality HR support without the need for a full-time in-house HR department.

Don't let complex employment issues hinder your business growth. Let Protean HR be your trusted partner in navigating the ever-changing landscape of employment practices.

Ready to ensure your HR practices are legally compliant and employee-friendly?

Contact Protean HR today for a consultation and take the first step towards robust and fair employment practices.