Last month Asda made the news through its consultation in Southeast England to cut pay in line with workers in other parts of the UK. The stores in the South East have historically been paid more to reflect the higher cost of living in areas closer to London. Workers have been told that those who do not agree to work under the new terms will be dismissed if they refuse to sign.
The GMB union have described Asda’s actions in this respect as a ‘fire and rehire threat’ also stating that ‘cutting the pay of 7,000 low-paid retail workers during a cost-of-living crises is inexcusable’.
So, is this legal?
Whilst it is not specifically prohibited by the law to unilaterally change an employee’s contract and rehire them under new terms, the practice of firing and rehiring staff on less favourable terms is a risky move for any business and should only be used as a very last resort where other options have been exhausted.
ACAS states that “the practice of fire and rehire is an extreme step that can damage staff morale, productivity, working relations and can also lead to industrial action”.
From an Employment Law perspective, the practice carries a high risk of Tribunal claims including Unfair Dismissal or even Discrimination claims if the changes disproportionally affect a particular group.
Other risks to consider include:
- Reduced staff morale, commitment and performance where employees have terms inflicted on them with no meaningful consultation to have their views heard.
- Valued employees leaving the business and increased absences.
- Strikes or industrial action.
- Reputational damage – it is not a good look for your business! Big companies such as P&O Ferries and Asda in this case have faced significant backlash in the press.
Following the actions of P&O Ferries last year, the government has pledged to issue a code of practice to manage how employers approach the use of fire and rehire practices and protect and enhance employees’ rights. Whilst not yet in force, the code shows a move towards further protection with the promise of a 25% uplift to compensation where employers do not follow the guidance.
If you would like to discuss contract changes within your business, please contact us for advice at [email protected]