Consultation outcome

Explanatory memorandum to the updated draft code of practice on dismissal and re-engagement

Updated 19 February 2024

1. Introduction

1.1 This explanatory memorandum has been prepared by the Department for Business and Trade and is laid before Parliament by Command of His Majesty.

1.2 This explanatory memorandum is for the Code of Practice on Dismissal and Re-engagement (“the Code”).

2. Purpose of the instrument

2.1 The Code is issued under section 203 of the Trade Union and Labour Relations (Consolidation) Act 1992 (“the 1992 Act”).

2.2 Its purpose is to provide practical guidance as the Secretary of State thinks fit for the purpose of promoting the improvement of industrial relations, where an employer:

• is considering making changes to one or more of its employees’ contracts of employment; and
• envisages that, if the employee and/or their representative does not agree to some or all of the changes, it might opt for dismissal and re-engagement in respect of that employee.

3. Matters of special interest to Parliament

3.1 None.

4. Extent and territorial application

4.1 The extent of the Code (that is, the jurisdiction(s) which the Code forms part of the law of) is England and Wales and Scotland.

4.2 The territorial application of the Code (that is, where the Code produces a practical effect) is England and Wales and Scotland.

5. European Convention on Human Rights

5.1 The Parliamentary Under Secretary of State, Kevin Hollinrake MP, has made the following statement regarding Human Rights:

“In my view the provisions of the Code of Practice on Dismissal and Re-engagement are compatible with the Convention rights.”

6. Legislative context

6.1 The Code is issued under section 203 of the 1992 Act. This section gives the Secretary of State a general power to issue Codes of Practice containing practical guidance for the purpose of promoting the improvement of industrial relations.

6.2 The Secretary of State considers that the practice of dismissing and re-engaging employees (sometimes referred to as ‘fire and rehire’) as a means of changing their terms and conditions of employment can give rise to conflict between employers, employees and trade unions, which can lead to a deterioration in industrial relations.

This Code is intended to provide practical guidance on avoiding, managing and resolving such conflict and disputes.

6.3 A failure to follow the Code does not, in itself, make a person or organisation liable to proceedings. But under section 207 of the 1992 Act, the Code is admissible in evidence in proceedings before a court, employment tribunal or the Central Arbitration Committee, and any provision of the Code which is relevant to those proceedings must be taken into account by the court, tribunal or Committee.

6.4 In addition, if an employee brings one of the employment tribunal claims listed in Schedule A2 to the 1992 Act, and the claim concerns a matter to which the Code applies, then the tribunal can:

• increase any award it makes by up to 25%, if the employer has unreasonably failed to comply with the Code; or
• reduce any award by up to 25%, where it is the employee who has unreasonably failed to comply

6.5 If the Code is approved by Parliament, the Code is to be issued by the Secretary of State under section 203 of the 1992 Act and the remaining procedure under section 204 of the 1992 Act is to be followed to bring the Code into effect.

6.6 In compliance with section 204(1) of the 1992 Act, before laying the draft Code in Parliament, consultation with ACAS and the public has already taken place in preparing the draft Code, with representations considered and the draft modified accordingly.

Under section 204(2) and (3), if the draft Code is approved by Parliament, the Secretary of State shall issue the Code in the form of that draft and bring the Code into effect on a day specified in an order made by statutory instrument, which is subject to the made negative procedure.

7. Policy background

7.1 Specific cases of dismissal and re-engagement, also known as ‘fire and rehire’, attracted significant media attention and raised the profile of the practice during the COVID-19 pandemic.

7.2 Concerns were raised about threats of dismissal being used as a pressure tactic in the early stages of discussions around implementing changes to employment contracts.

7.3 The Code clarifies and gives some legal force to accepted standards about how employers should behave when seeking to change employees’ terms and conditions.

7.4 Its purpose is to ensure that employers take all reasonable steps to explore alternatives to dismissal and re-engagement, and that they engage in meaningful consultation with a view to reaching an agreed outcome with individual employees and/or their representatives.

The Code also aims to ensure that employers do not raise the prospect of dismissal unreasonably early or threaten dismissal where this is not, in fact, envisaged.

7.5 The Code has been designed to strike the right balance between supporting employers to grow their businesses through a flexible labour market and protecting workers from unfair practices that undermine employment protections.

8. European Union withdrawal and future relationship

8.1 The Code does not relate to withdrawal from the European Union / trigger the statement requirements under the European Union (Withdrawal) Act.

9. Consolidation

9.1 The Code does not consolidate any legislation.

10. Consultation outcome

10.1 The government issued a public consultation on a draft Code of Practice on Dismissal and Re-engagement on 24 January 2023. The consultation was open for 12 weeks, until 18 April 2023, and received 50 responses: 8 responses from individuals and 42 responses from organisations, primarily consisting of trade unions, legal representative groups, and employers.

10.2 In response to the views expressed by consultees, the government made a number of changes to the draft Code.

10.3 The government published a response to the consultation on 19 February 2024.[1]

11. Guidance

11.1 The Code is itself guidance. Relevant stakeholders are referred to the content of the Code.

12. Impact

12.1 There is no, or no significant, impact on business, charities or voluntary bodies. This is because the Code operates within the existing legal framework with which employers are already required to comply.

12.2 There is no, or no significant, impact on the public sector. This is because the Code will apply to all employers and employees in England and Wales and Scotland equally.

12.3 A full Impact Assessment has not been prepared for the Code because there is expected to be a low level of impact on business. This low level of impact on business is expected because the Code does not impose any new legal obligations and operates within the current legal framework with which employers are already required to comply.

13. Regulating small business

13.1 The Code applies to activities that are undertaken by small businesses.

14. Monitoring & review

14.1 The approach to monitoring of the Code is to consider how it changes behaviour in scenarios where employers are considering making changes to employees’ terms and conditions and envisaging that they might opt for dismissal and re-engagement in order to effect the changes.

14.2 The Code does not include a statutory review clause.

15. Contact

15.1 Otis Long at the Department for Business and Trade, Otis.Long2@businessandtrade.gov.uk can be contacted with any queries regarding the Code.

15.2 Jayne McCann, Deputy Director for Participation and Individual Rights at the Department for Business and Trade, can confirm that this Explanatory Memorandum meets the required standard.

15.3 Minister Hollinrake, Parliamentary Under Secretary of State at the Department for Business and Trade, can confirm that this Explanatory Memorandum meets the required standard.

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[1] Government response to the consultation on the draft Code of Practice on Dismissal and Re-engagement. Available at: https://www.gov.uk/government/consultations/draft-code-of-practice-on-dismissal-and-re-engagement