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Fire and rehire

We have written extensively about the fire and rehire restrictions in our earlier articles. The implementation challenges are now becoming clearer, particularly around geographic mobility and business restructuring.

The Act deems a dismissal unfair where it is connected to an employee's refusal of "restricted variations" (for example, pay reductions, changes to hours or shifts, pensions, or reduced time off), unless the employer meets a stringent necessity test. For private employers, the test requires demonstrating that the variation is necessary for going-concern survival or financial sustainability and that the outcome is inevitable. Even where the necessity test is met, the employer must demonstrate fair process. The Act similarly deems unfair a dismissal to replace an employee with a non-employee (outsourcing or contracting-out), subject to equivalent narrow financial-distress exceptions.

A balance needs to be struck between an employer ruthlessly pushing through measures designed to maximise profit at the expense of its employees with the employer's legitimate right to sensibly restructure its business and correct earlier poor or outdated decisions.

The geographic mobility constraint is particularly acute. An employer with operations in London may be thinking of opening a branch in, say, Hartlepool in order to reduce property and labour costs. Employees refusing relocation may previously face dismissal for "some other substantial reason", with tribunals assessing reasonableness, or redundancy. Under the Act, such dismissals could be deemed to be automatically unfair unless the employer can demonstrate that the relocation is necessary for going-concern survival - a far higher threshold than commercial efficiency. This would have a chilling effect on companies wishing to assist in the regeneration of parts of the UK.

The rescue and restructuring impediments are equally concerning. Company voluntary arrangements, schemes of arrangement, and pre-pack administrations often require rapid workforce restructuring to preserve value and save jobs. The Act's 'inevitability' test may be difficult to satisfy in rescue scenarios where multiple restructuring options exist, each with different workforce implications. Insolvency practitioners may find that the constraints reduce the universe of viable rescue options, increasing the likelihood of terminal liquidation.