ACAS responds to HM Government’s consultation on its draft ‘fire and re-hire’ Code of Practice

ACAS raises concerns over key aspects of the proposed Code.

In February we wrote about the Department for Business, Energy & Industrial Strategy’s draft Code of Practice on Dismissal and Re-engagement (the ‘draft Code’) and consultation, which lasted until 18 April. We highlighted the key principles of the draft Code and considered the impact if it were confirmed. See our article: Draft Code of Practice on dismissal and re-engagement published (available on our website).

As noted at the time, the draft Code would stop well short of banning ‘fire and re-hire’ activity, but instead clarified the conditions under which changes to terms and conditions may be acceptable. In addition, it was commented that the draft Code did not change the risks of losing a legal claim, but would represent a substantial increase in financial risks due to the proposal that non-compliance with the draft Code could lead to an uplift in court and tribunal  awards.

ACAS has now published its response to the draft Code.

ACAS response

The response, which can be found here, is set out over 44 numbered paragraphs. Of those, it is worth noting ACAS’ comments that:

• It is difficult to codify guidance around dismissal and re-engagement because any code would need to sit alongside a complex set of existing legal principles drawn from statutory obligations and common law.
• ACAS has concerns about the workability of the draft Code and its ability to achieve stated objectives and has recommended the government give further attention to:
  • communicating when in a consultation process it is reasonable for employers to raise the possibility that employees will be dismissed and offered re-engagement if they do not agree to changes to terms;
  • how far an employer must explore alternative proposals put forward by employees before dismissal and re-engagement can be safely used;
  • clarifying the scenarios in which the draft Code would apply;
  • the language of the draft Code which refers to negotiation rather than consultation and does not accurately reflect requirements on employers with non-unionised staff;
  • the order of the steps set out in the Code which do not reflect the realities of consultation and negotiation and could result in poor practice by employers particularly in relation to the provision of information to employees at too late a stage;
  • the length, complexity and legalistic language used in the draft Code which makes it inaccessible to many of its intended users; and
  • the need for greater clarity around the expectations on employers and the consequences of certain actions set out in the draft Code.

ACAS also highlights in its response that the main incentivisation of the draft Code is that employers should follow it to avoid the potential uplift to damages for non-compliance.

ACAS points out that ‘fire and re-hire’  may be motivated by purely financial considerations as a less costly and quicker option than a redundancy exercise or retaining existing terms. In such cases, a 25% uplift on damages may not represent sufficient motivation for employers to follow the code. ACAS suggests that additional financial disincentives to employers are made available to courts and tribunals in some circumstances.   

Comment

As yet, the Government has not provided a response to the consultation, including this response from ACAS. It remains to be seen to what extent, if any, the concerns set out by ACAS will be addressed.

However, the concerns raised about accessibility and the clarity of the scope and effect of the draft Code, as well as the ordering of the steps set out in the draft Code would appear to invite further clarification and thought from the Government. Ultimately, employers will benefit from having a clear set of principles to follow when seeking to make changes to terms and conditions in compliance with employment law. Any Code of Practice on dismissal and re-engagement should be as accessible as possible to help employers to minimise the risks of claims and any potential uplift of damages where claims succeed.