Employment law update: Government starts consultation on the draft Statutory Code of Practice – Dismissal and Re-engagement
A draft Statutory Code of Practice on Dismissal and Re-engagement (the Code) has been published and a consultation seeking views on it is currently underway.
The government announced the introduction of a new statutory code of practice on the use of dismissal and re-engagement to bring about unilateral changes to employees’ terms and conditions following P&O Ferries’ dismissal of around 800 employees without consultation in March 2022. There had been calls for the practice of “fire and re-hire” to be banned at that time but the introduction of a statutory code of practice was the government’s preferred approach.
The Statutory Code of Practice
The Code sets out a step-by-step process that an employer should follow to look at alternatives to dismissal and to engage in meaningful consultation with trade unions, employee representatives or directly with the affected employees to find an agreed solution.
As a first step, employers should consult with staff about the proposed changes to terms and conditions and consult for as long as possible to reach an agreement. Once it is clear to an employer that employees will not accept the proposed new terms without negotiation, it should re-examine its business strategy and plans given the potentially serious consequences for its employees. It should then take part in a meaningful consultation with employees, sharing as much information on the proposals as possible. Alternative proposals raised by the employees as part of the consultation must be considered and an employer must be honest and transparent about the fact that it might consider a unilateral change or to dismiss to force the changes through if an agreement cannot be reached.
The Code treats dismissal and re-engagement as a last resort and emphasises that employers should not use threats of dismissal as a negotiating tactic, nor should it consider unilaterally imposing contractual changes until all reasonable alternatives which might result in agreement have been fully explored. A unilateral imposition will usually be a breach of contract.
The Code, once issued, will not impose any legal obligations on employers but employment tribunals will be required to take it into account when considering relevant cases which means that there will be financial consequences where an employer has failed to take the Code into account. Courts and tribunals will have the power to apply an uplift of up to 25% of compensation awarded in a relevant claim.
The consultation closes on 18 April 2023. A date has not been set to introduce the Code but it is expected to be brought into force after the consultation when Parliamentary time allows.