Can businesses fire and rehire employees - and are there legal risks? Employment solicitor Toby Pochron from Freeths examines the advantages and disadvantages of rehiring, outlining what employers need to know.
With the current government focus on fire and rehire practices, knowing what you can and cannot do with termination and re-engagement of employees in a variety of situations is of increased importance. Here I’ll look at rehiring employees after dismissal, redundancy, and resignation scenarios, and some of the advantages and disadvantages of rehiring in general.
Can you rehire employees after dismissal?
The most common scenario where an employer may be rehiring an employee after termination would be ‘fire and rehire’. A poll conducted for the GMB union in 2021, on the back of the British Gas fire and rehire incident, found that 76% of the UK public thought that fire and rehire should be banned. This gives a flavour for the general perception of this practice by the nation and indicates what reputational impact carrying out this process may have on an employer’s brand.
Fire and rehire is the practice of a company firing employee(s) with the intention of rehiring them under new terms, which may be less favourable to the employee(s). It is usually the route taken when an employer is unable to come to an agreement with their employee(s) to vary the terms of their contract(s).
If carried out fairly and correctly this route is lawful; however, following the P&O ferries incident earlier this year, the Government has announced that they will publish a new Statutory Code of Practice. While this proposed Code will not make the practice unlawful as a Statutory Code of Practice is not a legal obligation, it will provide more guidance and steps for employers to follow before getting to firing and rehiring. In general, it seems unlikely that anything further than this Code will be introduced, as there is a genuine need for businesses to have the option to react to changes in the business with alterations to conditions of employment.
Impact of the proposed code
If an employer does not comply with the Code when it is introduced, then the Tribunal will consider this in any legal proceedings against them and the impact would be a potential max uplift in employee compensation up to 25%. In essence, it will not be a barrier to prevent firing and rehiring, but it will add an extra layer of protection for employees against being unfairly treated, building upon Acas guidance on the topic.
Before considering legal risks, employers should consider the practical impacts and risks. In carrying out a firing and rehiring process, employers run the risk of breaking the trust and loyalty of their workforce, are likely to lose trained and skilled employees, and may potentially struggle to find new employees due to reputational impact.
Some of the potential legal claims off the back of a fire and rehire process are:
In summary, yes you can rehire dismissed employees; however, the fire and rehire process comes with risk and should always be the last option. While waiting for the Government’s Code to lay out the steps to take, employers should follow Acas guidance closely to mitigate risk.
Can you rehire an employee after redundancy?
A business can rehire an employee after making them redundant, but this also has associated legal risks. The danger with rehiring in this situation is that if other employees were made redundant at the same time as the employee you are rehiring, those employees then have scope to argue that their dismissal was not a genuine redundancy.
However, many companies will go through a genuine redundancy process and then their economic situation may suddenly change and a requirement to employ someone arises. In this situation, employers may not be able to wait several months before rehiring, in order to create a distance between the redundancy process and the hiring.
Therefore, when rehiring an employee who was previously made redundant, employers should believe that the redundancy process previously carried out was genuine, fair, and thorough to be safe in the knowledge if a claim is to be brought against them, they are watertight.
Can you rehire employees who have previously resigned?
Yes, this is the most legally risk-free situation of the three if there is a job suitable for the employee in the company. Employees who resign and then ask to come back to your business are usually aptly labelled ‘boomerang employees’. As there has been no dismissal by the employer and there is a presumption that the employee has left on good terms, whether they are rehired will depend on whether the individual is the best choice for the role.
To help make the decision on rehiring an ex-employee, a company may wish to create a rehiring former employees policy to have a clear structure and process to follow.
What are the disadvantages and benefits of rehiring former employees?
- The individual knows the job and the company: they should be able to slide back into working for the company smoothly.
- The employer knows how the individual works: making management of the employee much easier and a lower risk of poor performance than a first-time employee.
- Less training and onboarding required: making it cheaper and quicker for the employee to start working.
- The individual may have gained experience: if the employee worked elsewhere in between they will have hopefully gained further knowledge.
- Less loyalty: the employee has resigned before, and employers should consider if this is a risk moving forward.
- Less motivated: the employee may be less likely to strive to impress the company than a new hire.
- Potentially stuck in old patterns: if the company has adopted new technology or processes, the individual may struggle with reacclimatising to the job.
A note on continuous service
One final consideration when deliberating on rehiring employees is to consider whether continuous service has been broken by the period away from the company. A period of one full week between two contracts of employment will usually break continuous service if no exception applies. Once an employee has a period of continuous service of over 2 years, they are afforded greater protections under employment law.
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Written by Toby Pochron
Toby Pochron is a Senior Associate in the Freeths LLP Employment Law department. He was a Partner in the Employment Law department of Ironmonger Curtis.