Government to crack down on ‘fire and hire’ practices

P&O hit the headlines last year for all the wrong reasons when, due to financial issues, they took the drastic step of simply firing hundreds of staff and then offering them new, less favourable, terms of employment. The general backlash, led by the media (and made worse for P&O by some ferries being prevented from sailing due to safety concerns), has prompted the Government to take steps to stop such conduct.   

A new statutory code of practice (Code), which will be subject to the usual consultation process, will:

• make it clear to employers that they must not use threats of dismissal to pressurise employees into accepting new terms;

• set out employers' responsibilities when seeking to change contractual terms and conditions of employment, including a requirement to have fair and transparent consultation with their employees and representatives;

• require the employer to actively re-examine its business strategy in light of the potentially serious consequences for employees if agreement cannot be reached over changes to terms and conditions; and

• recommend the sharing of information, which currently only applies when collective consultation obligations are triggered.

The 'teeth' of the Code will enable Employment Tribunals to take it into account when considering a claim of unfair dismissal (where the employer dismisses an employee for not agreeing to the contractual changes) and to apply a 25% uplift to an employee's compensation where there has been a failure by the employer to comply with it (mirroring the position that currently applies where an employer fails to follow the statutory code of practice on disciplinary and grievances procedures).

Whilst the Code is the result of the specific circumstances of P&Os seafaring employees, it will apply as a general principle across all industries. The Code does not, of course, prevent employers from genuine restructuring and seeking to change terms and conditions; what it is seeking to do is to ensure that employers carry out a full consultation process before, if necessary, imposing any changes by terminating one contract and offering a new one on different terms. Whether the potential liability of a 25% uplift in any compensation awarded to an employee (should they bring a successful claim of unfair dismissal before the Employment Tribunal) will be sufficient to stop the 'hire and fire' practice in its tracks is up for debate. It is arguable that that the best protection against this controversial tactic is the court of public opinion, as P&O found out.