Fire and rehire – where do employers and employees stand?

The announcement that almost 500 British Gas employees have had their employment terminated as a result of refusing to sign a new contract which sought to impose longer working hours without additional pay has caused controversy.

The majority of commentators have sided with the workers and there is a general opinion in the media that British Gas have acted unfairly in dismissing employees for failing to agree to the new contract. British Gas have said that the changes are necessary in order to protect the company and its 20,000 employees.

What is the legal position for both sides? If an employer needs to change terms and conditions of employment in order to meet changing times how can they do this and what are the employee’s rights if they disagree?

Why change contractual terms?

There can be many reasons why terms of employment need to be changed. These can relate to a request from the employee to vary their hours (flexible working) or a pay rise. Often these can be easily agreed between the parties.

Difficulty may arise when employers are seeking to make changes the employee disagrees with which will vary the working practice in a way in which the employee views as detrimental to them.

How can a contract be varied?

By way of an overview, there are three principle ways in which a contract may be varied by an employer:

• seek agreement to the changes, and dismiss those employees who refuse to agree. The employees who are dismissed may have claims for unfair dismissal and (if the employer does not serve notice) breach of contract;
• terminate the existing employment contracts and offer re-engagement on the new terms. The employees may have claims for unfair dismissal and (if the employer does not serve notice) breach of contract, but the offer of re-engagement may mitigate their loss; or
• impose the changes, and leave it to the employees to decide how to respond. This may result in claims of constructive dismissal in addition to other claims.

You will see that each option is not without risk to the employer if the employee seeks to disagree and attempts to bring a claim as a result.

There should always be a period of consultation and an attempt to agree terms before imposing changes or terminating contracts of employment for failing to agree. Where there is a proposal to dismiss (and re-engage) 20 or more employees, then the collective consultation obligations will be triggered and will need to be followed. Collective consultation involves very specific steps and employers should seek advice on this area. In the case of the British Gas workers, the matter had been ongoing for 6 months and included union backed strike action before notice of termination was given.

What are the consequences of failing to agree a variation?

Varying contractual terms can be difficult and sensitive if there is a disagreement. Employers and employees should attempt to compromise and reach an agreement if at all possible during a period of consultation.

The timing of a proposal to vary terms is important and, where possible, should be linked to a benefit for the employees in exchange. In the British Gas matter, the changes have been imposed after 14 months of working as key workers during the pandemic, during which employees have felt additional pressures; some feel the amendments are the final straw after an overly difficult year.

If an agreement is not possible, the next steps will vary depending on the circumstances involved.

If an employment is terminated by the employer or the employee resigns following an imposition of the changes, then it may be open to the employee to bring a claim for unfair or constructive dismissal in addition to other possible claims. Employers will need to be mindful of this risk and take all steps necessary to minimise any liabilities. However, litigation can be lengthy and expensive and employees should seek advice before taking any action, including signing amended terms or resigning from their employment.

If you require advice on varying terms of employment please contact either Nick Smith or Laura Tennet of Mincoffs Employment Team or fill out the enquiry form below.