A summary of the Draft Code on Dismissal and Re-engagement

The Draft Code of Practice on Dismissal and Re-engagement (the Code) was published in January 2023. Although the Code is not yet in effect (consultation on the draft closes on 18 April 2023), employers should be prepared for any future change programmes that could result in the dismissal and re-engagement of staff by familiarising themselves with it now. Here we highlight some of the key principles in the Code.

References to [para] throughout the article relate to specific parts of the Code that can be accessed here.

What is the Code?

The Code sets out principles of best practice and guidance on changing terms and conditions of employment where the employer is considering dismissal and re-engagement if the proposed variations cannot be agreed.

While the Code is a non-legally binding document, and there is no standalone claim for a failure to follow it, it is admissible in certain Tribunal claims (such as claims for unauthorised deductions, unfair dismissal, and discrimination). A Tribunal could therefore adjust any award to a claimant by up to 25% where one party has unreasonably failed to comply with the Code. As most of the obligations under the Code are aimed at employers, it is likely that a Tribunal would be considering uplifting the award to the claimant due to an employer’s failure.

The purpose of the Code is: “to ensure that an employer takes all reasonable steps to explore alternatives to dismissal and engages in meaningful consultation with trade unions, other employee representatives or the individual employees in good faith, with an open mind, and does not use threats of dismissal to put undue pressure on employees to accept new terms, instead of seeking to find an agreed solution.” [para 5].

Some principles of the Code

The Code does not apply to dismissals by reason of redundancy [para 8]

There is separate non-binding guidance available from ACAS on how to conduct redundancy exercises. We will soon be sharing two webinar recordings covering both individual and collective redundancy consultations as well as publishing other guides and materials on collective redundancy processes as part of our Doing Business in 2023 campaign.

The Code applies regardless of the number of employees affected by the proposals [para 9]

Whether you have 1 or 101 employees the Code applies where you are looking to vary employee terms and conditions.

The Code doesn’t negate the need to comply with other legislation and collective bargaining arrangements [para 15]

The Code highlights the need to ensure that other relevant legislation is complied with depending on the circumstances (e.g. collective consultation under s.188 the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA), consultation under any information and consultation agreement an employer may have in place, consultation under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), etc. (the list is not exhaustive).)

It is recognised that there are likely to be specific legal information and consultation obligations that will have to be considered. These will include, for example, collectively informing and consulting employee representatives where 20 or more dismissals are proposed within a 90-day period at one establishment, as well as filing Form HR1.

The Code confirms that consultation is not a single event but an ongoing process [para 16]

It also requires employers to re-evaluate their initial proposal and, in effect, carry out an impact assessment on ‘firing and re-hiring’ if employees are not prepared to accept the variations [para 20]; and ensure that dismissal and re-engagement is the last resort [para 59].

Employers should not enter into any consultations with a closed mind. Consultation is an evolving process and the employer will have to consider carefully and respond fully to any counter-proposals or other suggestions made by employees or their representatives.

The consequences of proceeding to ‘fire and re-hire’ employees should be assessed and employers should consider if their desired outcome can be achieved in any other ways before they embark on dismissing and re-engaging.

The Code states that ‘employers should share as much information regarding the proposals as is reasonably possible’

This is ‘in order to enable employees and their representatives to understand the need for the changes, and to be able to ask questions and make counter proposals of their own’ [para 26].

It also addresses the need for employers to share information but that the information to be provided will be dependent on the circumstances and the changes proposed. It goes on to say that the more information an employer provides, the more productive the consultation is likely to be [para 32].

Employers sometimes argue that disclosure of too much information to employees or their representatives could damage the business further if the information was shared outside of the company. Subject to the requirements under the Listing Rules which require all listed companies to share certain company information with the City/ their shareholders before anyone else, it is likely that employers will be required under the Code to share more information with employees and their representatives than perhaps they currently do.

Clearly any commercially sensitive or competitive information could be withheld but the key point to note is that employees and their representatives need to have as much information as is reasonably possible so that they can understand the employer’s proposals. This will be a fact-sensitive balancing exercise for every employer.

The Code suggests that employers should consider whether they can provide other practical support to employees such as relocation assistance, career coaching or counselling for emotional support [para 63]

The support offered will depend on the proposed variations and the impact they will have on employees. It is also suggested in the Code that a phasing-in of changes (if applicable) should be considered [para 62].

The Code, once in effect, will add an additional burden on employers who will need to comply with the Code or risk an increase in awards made against them at Tribunal.

You may also find the following article and webinar helpful in planning any variation exercise.