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Tuesday, May 24, 2022
Following the mass outcry from the business community, politicians and unions over P&O Ferries’ recent treatment of over 800 employees, the Government department for Business Energy and Industrial Strategy (BEIS) stated it would be introducing a new Statutory Code of Practice. The aim of the code being to prevent employers from implementing controversial changes to terms and conditions through a mechanism termed “fire and re-hire”.
In reality P&O’s action were simply “fire” with a tactical use of compensation and deadlines to avoid the otherwise inevitable class action brought for unfair dismissal. There was no question the acts were unfair given the lack of notice and consultation however their approach worked. Setting aside the significant reputational damage to the business the unexpected announcement and subsequent enforcement succeeded with only a single claimant deciding to take legal action. Pitching the compensation at a higher level than that likely to be awarded by a tribunal and setting a clock ticking for agreement or losing the “generous offer” effectively paid off the staff.
With the economy presenting all the signs of heading toward a recession it would seem prudent to move forward at pace with the new Code.
The code is set to include practical steps that employers should follow. A court or Employment Tribunal will take the code into account when considering relevant cases, including unfair dismissal. The courts will have the power to apply an uplift of up to 25% of an employee’s compensation if an employer unreasonably fails to comply with the Code where it applies.
Labour Markets Minister Paul Scully made the following statement when announcing the proposed new code.
“P&O Ferries’ actions were not a case of fire and rehire – just fire. However, the way the company acted in not consulting employees before taking extreme measures was appalling. This has laid bare the measures some deceitful employers are prepared to take to exploit and break the law.
That is why we are producing a new code to tighten the screw on unscrupulous employers, who must comply with a new statutory code on tougher employment rules – including fire and rehire.
We expect companies to treat their employees fairly – and whilst the vast majority comply with the law – today we are going further to stand up for workers against those that flagrantly disregard it.”
Fire and rehire tactics are often used when employers want to change the terms and conditions of their workers. This can take place when a company is in financial distress and needs to cut costs to stay in business.
With a lack of clarity on the estimated date for introduction or even a timeline to progress the new code employees remain vulnerable to the acts of such as those perpetrated by P&O. Paul Scully MP and spokesperson for (BEIS), has only confirmed that the code will be introduced “when parliamentary time allows”.
We would always advise that business owners consult an employment law specialist, experienced in such matters, before launching any contractual changes within an organisation. Whilst on the face of it, P&O dodged a bullet their business has suffered considerable damage in being associated with practices that caused their employees distress and anxiety not least leaving so many without gainful employment.
With the new code pending, employers should tread carefully if looking to go down the fire and rehire route. We recommend that it is a last resort and the first step should normally always be to seek agreement with employees as to the changes.
With the recent P&O mass redundancies, it does raise the question as to whether a code with penalties will deter employers from using the fire and rehire method altogether. It might be that employers decide that the cost of not following the code do not outweigh the management time and efforts needed to follow it – similar to the cost analysis that potentially was applied by P&O. This is one to watch and we will keep you updated as and when we know more about the code.
Written by Robert Gibson, Senior Consultant - Employment Law
Robert is a Senior Consultant at Samuel Phillips and specialises in employment and business matters. He advises in relation to employment and shareholder disputes, including pensions and related issues.
