Jeopardy for breach of fire and re-hire code set to increase

As from 20 January, tribunals will be able to uplift protective awards by up to 25% where there has been a breach of the statutory code of practice on dismissal and re-engagement.

The new code of practice, which came into force last July, requires employers take “all reasonable steps” to explore alternatives to dismissal when proposing changes to employees’ terms and conditions. It was introduced as part of the last Government’s response to the P&O Ferries scandal of 2022, when 800 UK-based seafarers were dismissed without consultation and replaced by cheaper agency staff.

Fire and re-hire has always been a high risk process in terms of exposure to legal claims, notably proceedings for unfair dismissal and for protective awards under collective redundancies legislation. But there was concern that in some circumstances the commercial advantages of quickly forcing through new, less favourable terms and conditions could still outweigh any compensation an employment tribunal was likely to award for related breaches of employment law.

The new Code of Practice is designed to redress that balance. Like other statutory codes of practice, it is given additional teeth by empowering tribunals to increase compensation where there have been breaches of the Code, if this affected the outcome of related proceedings such as unfair dismissal. However, in the run up to the 2024 general election, there was not enough time for the outgoing Government to make new regulations to allow tribunals to uplift protective awards as well. This gap has now been closed by new regulations which come into force on 20 January. 

Looking further ahead, the Government is set to introduce much tighter restrictions on fire and re-hire. According to provisions included in the Employment Rights Bill, it will become automatically unfair to dismiss employees to force through changes to terms and conditions, except in very limited circumstances. However, those measures are unlikely to come into effect until late 2026. In the meantime, these new regulations will increase the maximum compensation payable for breaches of collective consultation requirements where employers have also failed to comply with the Code.

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