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Increased liabilities under new draft Code on dismissal and re-engagement – evidence is all (UK)
Friday, January 27, 2023

Back in November 2021 we reported here on some new Acas guidance on changing terms of employment through dismissal and re-engagement, and in November last year on the Government’s intention to issue a new statutory Code on that practice here.

A first draft of that Code has now landed and we can exclusively report that in terms of actual usefulness to employers it lives down to all reasonable expectations.  The draft elevates repetition to an art-form, cramming perhaps 4 pages of potentially helpful pointers into a full 16.  It is not nice to criticise something so obviously well-intended and in principle sensible, but do we really need: 4 statements that other statutory consultation obligations may be engaged, and that recognised trade unions should not be side stepped into the consultation process; 5 mentions of dismissal and re-hire being a last resort only and of the importance of avoiding discriminatory consultation methods or changes to terms, 7 separate nudges to the employer to provide as much information as possible and to keep its own business requirements under review in the light of representation received and a full 8 different renditions of the need for consultation to be genuine and open-minded.  There are only a comparatively restrained 2 cautions not to use threats of dismissal to put “undue pressure” on employees to agree new terms, which is a little odd as this was actually the main trigger for the consultation in the first place.

Strip all that away, however, and you do reach an almost incidental kernel of potentially interesting issues.  Their relevance arises from the inclusion within the Code of permission to Employment Tribunals hearing claims arising from fire-and-rehires to increase or reduce compensation by up to 25% for unreasonable non-compliance with it.  Therefore knowing what the Code actually requires of you, whether as employer or employee, is pretty important.

Almost all the obligations lie on the employer, so identifying some basis on which the employee can unreasonably fail to comply is not easy. There is the basic obligation to consult in good faith, but since it will never be an indication of bad faith not to agree to a worsening of one’s terms and conditions, that doesn’t seem like much of a runner. Ultimately you fall back on paragraph 53 of the Code, the obligation on an employee who is working under protest to keep saying so.  Quite how this is helpful to employment relations is not explained but the sanction is presumably imposed because working under protest without saying so could lull the employer into thinking that nothing further needed to be done, making the employee partly responsible for his own misfortune. 

For the employer, the key risk areas appear to be:-

  • Treading the very thin line between being “honest and transparent about the fact that it is prepared, if negotiations fail and agreement cannot be reached, to …dismiss employees in order to force changes through” (paragraph 38) on the one hand, and threatening dismissal only as a negotiation tactic in circumstances where the employer is not in fact contemplating dismissal as a means of achieving its objectives (also paragraph 38, very next sentence). This puts employers in a very tough position, since if you make it clear at the start of the negotiation that you are not willing to go down the fire-and-rehire route even as a last resort, your chances of obtaining employee agreement to detrimental changes to their terms are as near zero as makes no difference.  Therefore you have to be willing to say at the outset that if all else fails you will consider that route.  However nicely put, how is that not a threat? Maybe if you do it terribly gently, perhaps even apologetically, it can count as pressure but not “undue” pressure?

  • Providing the fullest practicable information at the earliest practicable time. The Code accepts that certain information may be withheld on grounds of commercial confidentiality, provided that that position is itself then fully explained.  On its face, however, if you miss some information or you start the process later than you could have done, then there could be a breach of the Code even if there is no evidence that your alleged default made any difference at all to the end results.

  • Related to that, paragraph 61 indicates that once the employer has decided on that route, “it should give as much notice as possible of the dismissal“, and “consider whether any particular employees might need longer notice in order to make arrangements which might better enable them to accommodate the changes…where possible an employer should agree to a longer notice period for employees to make these kinds of arrangements or find alternative work“.  The lesson from this would appear to be that there are no points to be gained by hanging off from starting consultation about dismissal and re-engagement in the hope that it will not be necessary – instead you should begin it essentially as soon as you have the idea, cause all the associated disruption and upset, and then hope that it becomes unnecessary.

  • The constant requirement to keep an eye on the actual need for the changes to terms proposed.  Under the Code, this seems to arise not just at the original planning stage but also during consultation, at the time of any proposed dismissals and again after the changes have been made, to the point that where changes can later be reversed, this should be actively considered. The Code suggests each of these to be separate obligations, so the employer’s duties are seemingly not satisfied just by doing all the necessary thinking at the outset and getting it right first time.

So overall, the practical or procedural burden on the employer is not much changed by the Code, nor the thought-processes required. What is now needed, if that 25% uplift is to be avoided, is a much more detailed and extensive record of those thought-processes.  These notes will need to demonstrate that repeated revisiting of the business drivers for the dismissal and re-engagement proposal, active consideration of all employee representations, reviewing what more detailed background information could be provided to affected staff, and (in particular) that no final decision to pull the trigger on dismissal and re-engagement is made until there are very good grounds to consider that there is simply no alternative – meaning as a minimum that all collective mechanisms are exhausted, there are no signs of further movement on either side and the parties to the discussions are near-hysterical with fatigue and mutual resentment.

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