Firing & Rehiring: Acas Report


11 June 2021

By Josh Fresle

Acas have now published the report from their investigation into dismissal and re-engagement (otherwise known as "fire and rehire").

The recent flurry of media reports of large UK employers such as British Gas/Centrica implementing a strategy of firing and rehiring employees in order to change their terms and conditions of employment, saw government officials from the Department for Business, Energy and Industrial Strategy (BEIS) inviting Acas to carry out an investigation into the practice. Their report following this investigation has now been published.

Acas have been careful to highlight that this investigation was a fact-finding mission only, and they have not been asked to present any recommendations to government.

The focus of this fact-finding exercise was to gather data to help BEIS officials determine whether government intervention is necessary to combat the issue, or whether there is in fact an issue in need of combatting at all. Paragraph 6 of the report states:

"BEIS officials were interested to establish evidence to help them consider whether interventions are needed to address this issue, including more clarity around:

  • whether fire-and-rehire is a new practice – has it emerged or increased as a response to the COVID-19 pandemic; was it seen as part of the response to the 2008 recession?
  • its prevalence – is it limited to the examples reported in the media; to a small number of large organisations in certain sectors; or is it more widespread?
  • the contexts in which fire-and-rehire is used – for instance, is it used as an unavoidable last resort, as a heavy-handed negotiation tactic, or in other ways?
  • stakeholder insights and view on the practice and on whether policy interventions are needed from government and/or others to address the issue"

Acas's fact-finding exercise consisted of a series of confidential discussions with stakeholders including, but not limited to: professional bodies; trade unions; employment lawyers; employer bodies; academics; and Acas senior advisors. In total, Acas held discussions with 15 participants across ten organisations.

The following findings have been taken from the report:

"The practice of fire-and-rehire was described as a longstanding, and certainly a pre-COVID, phenomenon. Various observations about its historical use were expressed." (Paragraph 15)

"There was a shared sense among some that the practice has been becoming increasingly prevalent in recent years, in a trend predating the COVID-19 pandemic." (Paragraph 17)

"A number of trade union, legal representatives and employer advisor participants identified a growth in enquiries and/or use of the practice post-March 2020." (Paragraph 18)

"There was a broadly shared view that the repeated extensions to the government's furlough scheme and related business support initiatives had helped lessen the potential need for employers to make the kinds of changes in the immediate term that might lead to them considering a fire-and-rehire approach. There was equally a shared anticipation that a further increase in use of the practice might be expected when the furlough and related initiatives are wound down". (Paragraph 22)

Although the purpose of this investigation was not to produce recommendations for the government to address the issue of fire and rehire, Acas did identify some potential measures that could be taken should the need arise. They also highlighted a need for caution and careful consideration so as not to create a more significant problem and referenced the potential for increased redundancies and business failures. The Executive Summary of the report states:

"Suggested legislative options included: tightening up the law around unfair dismissal; enhancing the requirement and capacity for employment tribunals to scrutinise business' rationale for change in relevant cases; protecting continuity of employment in fire-and-rehire scenarios; and strengthening employers' consultation obligations around proposed dismissals.

Suggested non-legislative options included: improved guidance for employers on relevant legal obligations and good practice; using data on fire-and-rehire to inform decisions around public procurement and access to government funding; and publishing 'name and shame' data on employers' use of fire-and-rehire practices on a government website."

It is yet to be seen whether any action will be taken to address the practice of firing and rehiring employees in order to change their terms and conditions of employment. The Employment (Dismissal and Re-employment) Bill 2019-21 seeks to include dismissals for the purpose of re-employing the employee on worse terms as a ground for unfair dismissal. If the threat of fire and rehire is increasingly used as a tactic by employers to "persuade" employees to accept less favourable terms, this would certainly cause concern as it promotes unequal bargaining power in employer-employee negotiations. It will be interesting to see whether any British Gas/Centrica employees decide to bring a claim to the employment tribunal in the near future, and what clarity this may provide.

This is not legal advice; it is intended to provide information of general interest about current legal issues.