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Fire and rehire: a strategy leading to uncomfortable outcomes?

Posted: 28/05/2021

Following the employment law crisis caused by the Covid-19 pandemic, a move towards business employment restructuring is afoot in a number of industries, which is likely to increase into autumn 2021 as the Coronavirus Job Retention Scheme (furlough) is unwound. One of the methods by which such restructuring is taking place is through the strategy of ‘fire and rehire’, whereby the employer decides that it needs to reduce employee headcount and proposes to restructure at a particular level or group within the business, and to invite the affected employees to competitively apply for jobs in the new structure. A variation on that theme has just been announced for engineering workers at Weetabix Limited, with the resulting threat of industrial action if a ballot between 27 May and 3 June 2021 approves this.

In order for industrial action to take place in a unionised workforce, it must be protected industrial action between the employer and the workers taking part in that action.

Additionally, the industrial action must be taken ‘in contemplation or furtherance of a trade dispute’ only after a ballot of those employees that the union intends to induce to take action, with the requisite majority having voted in favour of the proposed measure, and with the ballot complying with the procedural formalities set out in the Trade Union and Labour Relations (Consolidation) Act 1992. The formalities include notifying the employer of the content of the ballot paper and the outcome of the ballot, having the ballot independently scrutineered and commencing the industrial action before the ballot becomes stale due to passage of time. The union is then required to serve on the employer notice of no less than 14 days before the start of the industrial action.

The concept of a ‘trade dispute’ is widely defined. It includes ‘the terms and conditions of employment … of workers’, and the ‘engagement or non-engagement, or termination or suspension of employment or the duties of employment, of one or more workers’. A restructuring of a business, whereby job losses may arise and/or changes to terms and conditions of employment are proposed, is therefore capable of amounting to a trade dispute.

The effect of engaging in protected industrial action after a successful balloting process is that, provided any resulting industrial action is compliant with the Code of Practice on Picketing, no members of the trade union organising the action, union representatives or workers taking part in the action can be the subject of an injunction. Where the workers are taking part in industrial action protected by a ballot, the employer is prevented from selectively dismissing or re-engaging any of those workers.

However, simply because a trade dispute may arise between an employer and its employees, this does not, of itself, prevent the employer from undertaking such a restructure or dismissing employees as a result of that restructure. The fire and rehire model has been approved by case law going back to 1997[1] as potentially giving rise to a redundancy situation if there is a diminution/cessation in the employer's requirements for employees to carry out work of a particular kind, or such an expectation in the future. Where there is a diminution/cessation of work, provided that the employer: (a) notifies the affected employees of the risk of redundancy at the earliest opportunity; (b) if there is to be a selection based reduction in the required number of employees from within a particular group, provides them with details of objectively fair selection criteria which are then applied by the employer in an objectively fair way; (c) undertakes a consultation process with the employees allowing them to present alternatives to dismissal; and, (d) offers any available alternative employment, the employer will likely have a good, arguable defence to unfair dismissal claims which may be presented. Indeed, in such a case, the employer’s exposure would likely be limited to statutory redundancy payments to employees with two or more years’ continuous employment.

The other situation which may arise in fire and rehire cases is in relation to collective redundancy consultation. An obligation arises to consult with ‘appropriate representatives’ of the affected employees where the employer is ‘proposing’ to dismiss as redundant 20 or more employees from ‘an establishment’ within a 90 day period.

Appropriate representatives are trade union representatives and, if there are none, standing workplace representatives or, if none, ad hoc elected representatives.

An establishment is the relevant self-contained operating unit at which the employee is employed to work[2].

Consultation must be undertaken with a view to reaching agreement and include consultation about ways of avoiding the proposed redundancies; reducing the numbers to be dismissed; and, mitigating the consequences of dismissal.

To ensure that consultation is meaningful, the proposal for redundancy must not have resulted in a settled decision to dismiss prior to the consultation, otherwise the purpose of the consultation is defeated[3].

If employers can safely negotiate these hurdles, then despite the possibility of trade disputes, they may avoid the sort of blockages which are threatened to arise from the Weetabix situation.   



[1] Safeway Stores plc v Burrell [1997] IRLR 200

[2] Seahorse Maritime Ltd v Nautilus International [2018] EWCA Civ 2789

[3] Junk v Kuhnel [2005] EUECJ C-188/03

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