Employment law: Ongoing Consultations

Consultation on controversial dismissal practices (“fire and rehire”)

What do we need to know?

• In January 2023, the Government launched a Consultation on introducing a new statutory Code of Practice aimed at cracking down on unscrupulous employers using controversial dismissal tactics such as ‘fire and rehire’. This describes a situation when an employer fires employees and offers them new contracts on less favourable terms.
• This Consultation followed the well-publicised case of P&O Ferries sacking over 700 employees without any consultation. The Government was coming under significant political pressure to be seen to take action. Government cracks down on ‘fire and rehire’ practices – GOV.UK (www.gov.uk)
• The Consultation proposes introducing a Code of Practice that has statutory ‘teeth’ and directs employers not to use threats of dismissal to pressurise employees into accepting new terms.
• Courts and Employment Tribunals will be able to take the new statutory code of practice into account in employment claims and will have the power to apply a 25% uplift to an employee’s compensation where the employer is found to have breached the code.
• The proposed Code of Practice does not interfere with or change the current collective consultation requirements to collectively consult if more than 20 dismissals are proposed in a 90-day period.
• The Consultation closed in April 2023 and the Government has not yet published its response. Increasing worker protections will form a key part of Labour’s election battleground so we can expect to hear more on this Consultation as the parties start to set out their stalls in advance of the general election .

Consultation on restrictions on non-compete clauses

What do we need to know?

• In its policy paper, Smarter regulation to grow the economy, the Government proposed limiting to a maximum of 3 months the duration of clauses preventing employees and workers from working with competitors after employment ends. This limitation would not apply to the length of garden leave or notice periods; nor would it affect other types of restrictive covenant such as those preventing solicitation of customers or employees.
• What isn’t clear is whether existing non-compete clauses in contracts would become unenforceable past 3 months or whether it would only apply to new clauses agreed after the proposed law comes into force. It is also unclear whether it would still be possible to agree non-compete clauses longer than 3 months in a settlement agreement in return for a payment.
• In any event, it seems unlikely that anything will happen in the foreseeable future. The Government have said they will introduce it when ‘Parliamentary time allows’ and it isn’t a topic likely to stir up much interest as part of election campaigning.
• If it does come into force, employers will want to look at whether to increase the length of garden leave and/or notice clauses in certain cases to ensure business interests are adequately protected. For example, where the risk of a key employee working for a competitor soon after termination would present a significant and tangible business risk.

Explore more updates in this issue of Employment Matters below.

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