Employment Rights Bill: Restrictions on fire and rehire and collective consultation thresholds in redundancy situations

In July 2024, a new statutory code of practice on fire and rehire came into force. This code of practice says that fire and rehire should be treated as a "last resort" but that it can be used where the employer has "participated in a thorough and open information-sharing and consultation process, as part of which it has genuinely considered any reasonable alternative proposals".

The Bill proposes to make it automatically unfair to dismiss an employee for refusing to agree to a change in their contract of employment, except where the employer can show:

• evidence of financial difficulties;
• that the firing and rehiring was to eliminate, prevent, or significantly reduce or mitigate the difficulties; and
• that the need to change the contractual terms was not reasonably avoidable.

Even where an employer can meet each of these tests, an employment tribunal will still have to assess whether the dismissal was fair in the circumstances. It will consider whether the employer consulted with the employee, trade union or other employee representatives, and whether the employer offered the employee anything in return for agreeing to a variation to their contract.

Finally, it should be noted that making these dismissals automatically unfair means that employees will be able to bring an unfair dismissal claim even if dismissed during their probation period. (The requirement for two years' service is, of course, to be removed by the Bill.)

The Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) provides that an employer must collectively consult with affected employees when they propose to make 20 or more redundancies at one establishment within any 90-day period.

The Bill amends the provisions of TULRCA to remove the references to "one establishment". The effect of this is that all proposed redundancies at all of an employer's sites are added together for the purposes of the requirement to collectively consult.

It will therefore no longer be possible for employers to avoid the requirement to collectively consult by ensuring that only 19 or fewer employees at each establishment are to be made redundant.

However, the proposal raises a potential issue where an employer is conducting multiple redundancy exercises at once and triggers the requirement to collectively consult. It is not clear from the Bill whether the employer is obliged to carry out a single consultation across all employees regardless of their role, or separate consultations for each redundancy exercise.

The Bill is also not clear on the situation where a redundancy consultation triggers the requirement to collectively consult after a previous redundancy exercise (within the last 90 days) has concluded and the employees made redundant. This may mean that the employer has acted illegally by failing to collectively consult with employees during the first redundancy exercise which did not trigger the collective consultation requirement. Whilst this problem also arises under the current law, the likelihood of it arising under the Bill is substantially increased.