Employment Rights Bill

The Employment Rights Bill will make it automatically unfair to dismiss an employee if the principal reason for dismissal is that the employee refused to agree to a variation of contract sought by the employer.

It will be automatically unfair to dismiss an employee:

• for failing to agree to a change to their terms and conditions of employment or
• to re-engage them (or someone else) under varied terms and conditions of employment, but where the role is otherwise substantially the same

There will be no qualifying period of employment to benefit from this new right; it will be afforded to all employees from day one of their employment.

The only (narrow) exception will be where the reason for the variation was to eliminate, prevent or significantly reduce/mitigate the effect of any financial difficulties which, at the time of the dismissal, were affecting, or were likely in the immediate future to affect, the employer’s ability to carry on its business, and there was no way the need to make the variation could reasonably have been avoided.

Even where the exception does apply, the dismissal could still be ordinarily unfair, even if not automatically unfair. The Bill provides that in such cases various matters must be taken into account by a tribunal when determining whether the dismissal is fair or not, including any consultation with the employee and any trade union or employee representatives about the proposed variation and anything offered to the employee in exchange for agreeing to the variation.

When these changes come into force, the current statutory code of practice on dismissal and re-engagement will need to be replaced. The code prescribes the process to be followed by employers before dismissing and offering to re-engage in any circumstances. A breach of that process does not give rise to a legal claim in itself but may lead to an uplift of 25% to any compensation awarded in related claims.

Interim relief

The government is consulting on whether interim relief should be available to employees who are bringing an unfair dismissal claim under the new right.

In a 'fire and rehire' scenario, the consultation asks whether an employee who makes a claim for unfair dismissal in a ‘fire and re-hire’ scenario should be able to make an application for interim relief.

An award of interim relief would mean that the employee would continue to be paid, pending the final hearing, but interim relief would only be awarded where the employee can show it is ‘likely’ that their unfair dismissal claim would succeed, i.e. that they have a pretty good chance of showing that their dismissal was unfair under the new right. This would ensure that they are no worse off pending the hearing, which would lead to greater protection of employees in ‘fire and re-hire’ situations and further disincentivise employers from using ‘fire and rehire’, unless it is genuinely a last resort.

The nature of interim relief applications is that they are made quickly (within 7 days of dismissal) and considered by the tribunal shortly afterwards.