The TUC is the voice of Britain at work. We represent more than 5.5 million working people in 48 unions across the economy. We campaign for more and better jobs and a better working life for everyone, and we support trade unions to grow and thrive.
Unions have an excellent track record of fighting fire and re-hire attempts by employers. Notable union campaigns include successfully fighting employers attempts to dismiss and re-engage at Tesco, Clarks, Douwe Egberts and British Airways.
Nevertheless, the current legal framework still gives employers excessive leeway to impose unwarranted cuts to terms and conditions.
The TUC welcomes the opportunity to provide feedback to improve the draft code. We welcome the emphasis in the code on encouraging greater consultation with unions. We know that where unions have a voice in the process and put forward alternative proposals, fire and rehire can be avoided.
However, the TUC is concerned about the draft proposals for a statutory code for two principal reasons.
Firstly, the government has promised to strengthen the employment law framework to prevent P&O Ferries-type fire and rehire scandals. The government has failed to do this and the draft code, in isolation, is totally inadequate to deal with the escalating employer practice of large-scale dismissal and re-engagement. Below we set out the legislative steps that should be taken to effectively tackle dismissal and reengagement.
Secondly, the draft code needs significant improvement so that it is clear about what steps are required to ensure that employers engage in meaningful consultation, and it should be expanded to cover claims relating to breaches of consultation obligations in redundancy situations. For example, if an employer breaches collective redundancy consultation obligations and is liable to pay a protective award to an employee, this payment should also be subject to the 25 per cent uplift that could apply for not complying with the code.
The government press release says that the draft code is being introduced in response to the “controversial dismissal tactics” used by P&O Ferries when it unlawfully sacked an entire workforce without notice and replaced them with an agency crew.
In the wake of the P&O Ferries scandal, Grant Shapps, Secretary of State for Transport at the time, said the government would “send a clear message to the maritime industry that we will not allow this to happen again. That where new laws are needed, we will create them. Where legal loopholes are cynically exploited, we will close them. And where employment rights are too weak, we will strengthen them”.
The proposed draft code does not adequately strengthen the UK’s current employment law framework. It does not close the legal loopholes that allowed P&O Ferries to evade criminal and financial sanctions, and it does not strengthen unfair dismissal rights to prevent an employer from sacking their workforce and either re-hiring them on inferior conditions or replacing them with another workforce.
Fire and re-hire tactics are used by employers because it is relatively easy to lawfully sack workers and re-hire them.
Under unfair dismissal legislation one of the potentially fair reasons for dismissal is “some other substantial reason” (SOSR). This is a broad test that gives employers a great deal of leeway to dismiss employees for a wide range of reasons. In Hollister v National Farmers Union the Court of Appeal held that if an employer had ‘good business reasons’ for reorganising a business and dismissed an employee who would not accept new terms, they could rely on SOSR as the reason for dismissal.
As a result, it is too easy for employers to sack their workers and either re-engage them on inferior terms and conditions, or replace them with another workforce. The draft code does not change this position.
Effective sanctions are needed to deter employers from using fire and rehire tactics to reduce workplace terms and conditions.
At P&O Ferries, the employer was willing to brazenly flout the law because it could calculate the low financial cost of non-compliance with the relevant legislation. P&O Ferries had a legal duty to consult with unions about the fire and rehire proposals as these concerned dismissals for a reason ‘not related to the individual concerned’. Failure to comply with these consultation obligations meant that every affected employee could have been entitled to compensation (a 'protective award'). This can be up to 90 days' full pay for each affected employee. Scandalously, P&O Ferries took the pre-meditated decision to cost in the price of non-compliance. If P&O Ferries had faced an increased, unspecified sanction then it may have chosen to engage in meaningful consultation with unions.
The consultation process is vital. It enables unions to put forward alternative proposals to save jobs. Employers should not be able to skip this important step and only face a meagre penalty for doing so.
The statutory code of practice does not sufficiently increase the sanctions that an employer will face for failing to fulfil their consultation duties.
The statutory code of practice does state that where an employer is found to have unlawfully dismissed a worker in a fire and rehire situation then the employee could be awarded a 25 per cent uplift in damages. This is unlikely to be a proper deterrent, not least because, as was the case with P&O Ferries, it still allows an employer to accurately price-in the cost of flouting the law.
Furthermore, the 25 per cent uplift in damages will only apply where an employer has been found by a tribunal to have unfairly dismissed an employee. As discussed above, it is relatively easy for an employer to dismiss an employee ‘fairly’, by relying on some other substantial reason.
P&O Ferries engaged in a dismissal and re-engagement type exercise and admitted breaching its legal obligations under S.188 TULR(C)A.
The duty to consult with trade unions is a highly relevant statutory obligation in many fire and rehire exercises. However, if an employee brings a successful claim for a protective award and can show that the employer did not comply with the dismissal and re-engagement code, the tribunal would be unable to uplift any award by 25 per cent, because this area of law falls outside the scope of the draft code.
It is concerning that the draft code, introduced in response to the P&O Ferries scandal, would not apply to situations similar to the P&O Ferries scandal in the future.
Workers in insecure employment do not fall within the scope of the draft code. This means that agency workers or zero-hours contract workers can be dismissed and re-engaged without employers having to consider the consultation procedures set out in the draft code. Workers in insecure, intermittent and precarious employment already have little in the way of job, hours or income security, so this only reinforces and perpetuates existing inequalities between them and those on more permanent employment arrangements. The code should have been extended to cover workers in insecure employment to give them some additional protection.
Paragraph 8 states that the draft code does not apply where the reason an employer envisages dismissing an employee is redundancy as defined in the Employment Rights Act 1996. This is concerning as there is case law which states that a redundancy situation covers circumstances where an employee is dismissed and indirect labour is engaged to perform precisely the same role as previously undertaken by the employee.
The differentiation between that scenario and where it is said the Code will apply (where an employee is dismissed and an employee or a “worker” is engaged on inferior terms) is potentially inconsistent and greater clarification is required.
If an employee is replaced by a worker an employer may well assert that is a redundancy within s139 (1) and the Code has no application which is clearly not what the Code itself envisages given what is made expressly clear in it elsewhere.
The TUC is concerned that paragraph 42 of the draft code doesn’t make clear enough that an employer who recognises a trade union for collective bargaining, or where an independent trade union is seeking recognition with the employer, faces substantial risks from any ‘offers’ made direct to the affected workers under s.145B of the Trade Union Labour Relations (Consolidation) Act 1992. The UK Supreme Court has held such offers will cause the prohibited result where there is a ‘real possibility’ that, if the offers were not made and accepted, the workers’ terms in question would have been agreed through collective agreement.
The TUC believes the following steps should be considered to deter employers from using fire and rehire tactics and to provide safeguards that protect job security in fire and rehire situations:
 Sillars, J. (30 March 2022). “P&O scandal: Ports reject Grant Shapps plan to police ferry firms' minimum wages”, Sky News.
 Hollister v National Farmers’ Union  ICR 542
 Kostal UK v Dunkley and others  UKSC 47
 (March 2022). Volume 711, “P&O Ferries and Employment Rights”, Hansard.
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