Changing an employee’s terms and conditions is challenging both from a legal and trust perspective.

British Gas has been in the media over recent weeks due to the “fire and rehire” approach with their employees.

British Gas had proposed the following changes to their employees:

  • An increase in working hours from 37 to 40 hours per week;
  • The working day starting from arrival at the home of the first customer, rather than from leaving the worker’s home; and
  • No higher weekend rates.

British Gas did not propose any changes to either the employees’ base pay or the final salary pension scheme arrangements.

Chris O’Shea the boss of Centrica (the owners of British Gas) said to a government committee that the changes were essential for British Gas to remain competitive. The Daily Telegraph reported that over the last 10 years, British Gas had lost around 3,000,000 customers, cut about 15,000 jobs and seen its profits halve. Therefore, it needed its workforce to ‘share the pain’ or face the prospect of a further round of enforced redundancies.

The Company had been in consultation with the Trade Unions and employees since mid/late 2020. Eventually, the employees either had to sign new contracts of employment with the revised terms and conditions or were to be dismissed and offered new contracts of employment on the revised terms of employment. Approximately, 500 employees left British Gas on Friday 16th April after refusing to sign the revised employment contracts.

This story is one that may become more common as other executives understand the cost of Coronavirus to the long-term prospects of their businesses. To prevent these tactics being used by employers a petition was presented to government calling for the “fire and rehire” scheme to be banned. The Guardian reported that the petition had 126,000 signatures.

Fire and re-hire

The legal term for ‘fire and re-hire’ is dismissal and re-engagement.

This strategy may be used by employers when employees do not agree to the changes that the employer proposes to make to the contract of employment. 

It is a risky approach, as the employee could refuse to accept the new terms and conditions that are offered and bring a claim against the employer for unfair dismissal, if the employee has been employed for two or more years.

For the employer to be able to defend a claim for unfair dismissal they must establish a fair reason for dismissal and show that it acted reasonably when deciding to dismiss the employee for not accepting the changes.

To be able to show that the dismissal was for a fair reason the employer will need to provide a sound business reason as to why it was necessary to dismiss an employee who did not accept the changes. A Tribunal will consider whether dismissal was within the range of reasonable responses open to a reasonable employer. If the employer failed to follow any or an insufficient consultation process with an employee before giving its ultimatum, then it is likely that the Tribunal will find that the dismissal is unfair. Such a consultation should consider what the options are including, if appropriate, alternative arrangements or redeployment. The employee should be given adequate warning that their job is at risk if a resolution is not reached.

Therefore, whilst a ‘fire and rehire’ strategy is sometimes commercially imperative it is important that you can demonstrate a sound business reason for doing so and that you have followed a thorough consultation process with the employee(s) prior to dismissal.

If you have any queries in relation to the above or require advice on any other employment law related issue please contact the Employment team at Downs Solicitors.