Abolition of ‘Fire and Rehire’

It is no secret that significant changes are on the horizon in Employment Law. While many of these developments are imminent, an increasing number of clients are approaching us for proactive strategies to stay ahead. However, one major change seems to be slipping under the radar…

Among the proposed measures in the upcoming Employment Rights Bill—expected to come into effect as early as October 2025—is a provision that would make it automatically unfair for an employer to dismiss an employee for refusing a contractual change. Crucially, employees would be able to bring this type of claim for unfair dismissal regardless of their length of service. This represents a significant shift, placing ‘fire and rehire’ on par with dismissals for protected reasons such as pregnancy or maternity leave, whistleblowing, or raising health and safety concerns.

Fire and Rehire: A Recap

The practice of ‘fire and rehire’ (also known as dismissal and re-engagement) has attracted considerable negative publicity in recent years, but it remains a legitimate, and sometimes necessary, tool for employers. When an employer needs to implement changes to contractual terms and cannot obtain employee agreement, they may resort to terminating the existing contracts and re-engaging employees on revised terms.

Common reasons for implementing such changes include the need to:

• Amend overtime arrangements
• Adjust working hours
• Introduce or modify shift patterns
• Alter the nature of a role or its associated duties
• Remove a prohibitively expensive benefit

Underlying these needs may be a range of business drivers, such as:

• Responding to client or operational demands
• Managing financial pressures
• Staying competitive in the market
• Reducing operational costs

Impact of the Proposed Changes

If such changes are enacted, the Employment Rights Bill will substantially limit employers’ ability to adopt a fire and rehire approach when seeking to make contractual changes. To avoid the dismissals being treated as automatically unfair, the employer will need to show:

• Evidence of financial difficulties that were affecting the business’s viability; and
• The changes were to eliminate, prevent, significantly reduce or significantly mitigate the effects of those financial difficulties; and
• The need to make the change in contractual terms was unavoidable

In reality this means that employers will only be able to rely on this practice when they are in dire financial difficulties which threaten the viability of their business and, even then, they will still need to be able to demonstrate that they followed a proper process, to avoid liability altogether.

Preparing for the Change: Practical Steps for Employers

We have been advising our employer clients to examine and, potentially, broaden specific contractual clauses to enhance the amount of flexibility they have to make contractual changes without consent, in anticipation of this legislative change.

Key clauses to review include:

• Working hours – Rather than prescribing specific shift patterns, consider including a range of working hours (e.g. between 6am–10pm), with a set number of hours to be worked per week or month.
• Location – In addition to stating the employee’s main place of work, consider including a reasonable geographic radius within which their main place of work could be located, to accommodate future changes in location.
• Duties – Broaden the scope of job duties and responsibilities to anticipate needing to make adjustments in response to evolving business needs.

Although there can be legal limitations to their enforceability, it is often useful to include a general variation clause that allows either party to make changes of a non-material nature, to the contract. However, even where such a clause exists, it is well established that employers must ensure they comply with any stipulated conditions—such as providing ‘reasonable notice’ of any proposed change.

Conclusion

The abolition of fire and rehire in its current form will significantly reshape the employer’s approach to contractual flexibility. Taking action now—through thoughtful contract drafting and strategic review—can help organisations retain agility in a tightening legal landscape.