Code of Practice on Dismissal and Re-Engagement

Motion to Approve

That the draft Code laid before the House on 19 February be approved.

My Lords, this code of practice, which I will refer to as “the code” for the remainder of this debate, will give legal force to accepted standards about how employers should act when seeking to change employees’ terms and conditions.

The purpose of the code is to ensure that dismissal and re-engagement is only ever used as an option of last resort. The code also seeks to ensure that, where an employer wants to make changes to an employee’s terms and conditions, the employer engages in meaningful consultation with a view to reaching agreement with employees or their representatives in good faith. Employment tribunals will have the power to apply an uplift of up to 25% to an employee’s compensation if an employer unreasonably fails to comply with the code where it applies.

Between January and April 2023, the Government consulted on a draft code, enabling trade unions, employers and other interested parties to contribute their views. In accordance with the Trade Union and Labour Relations (Consolidation) Act 1992, the Secretary of State also consulted ACAS on a draft statutory code before publishing it. Careful consideration was given to those views and, as a result, changes were made to the draft code. An updated draft code was laid in Parliament on 19 February.

The Government have been clear that threats of dismissal and re-engagement should not be used as a negotiation tactic by employers. When the Covid-19 pandemic led to cases of dismissal and re-engagement, the Government asked ACAS to conduct an evidence-gathering exercise to help us better understand the issue. That report was published in June 2021. The Government then went further and asked ACAS to produce new guidance to ensure that employers were clear on their responsibilities when making changes to employment contracts. That guidance was published in November 2021. ACAS has also published guidance for employees. The Government are now going even further to address the use of dismissal and re-engagement by bringing forward the code, aiming to ensure that this practice is only ever used as a last resort and that employees are properly consulted and fairly treated.

In all these discussions, we must balance protections for employees with business flexibility. There have been calls to ban the practice of dismissal and re-engagement and suggestions to legislate to restrict its use in a manner that amounts to an effective ban. This Government believe that we must preserve companies’ flexibility to manage their workforce in times of crisis. It is, therefore, right that we have mechanisms to enable us to save as many jobs as possible. The code is a proportionate response to dealing with controversial “fire and rehire” practices, balancing protections for employees with business flexibility. I know that the vast majority of employers want to do the right thing by their employees. For most employers, decisions to change terms and conditions are not taken lightly, nor is the choice to let members of their workforce go.

Moved by

At end to insert “but this House regrets that the draft Code contains no effective measures to restrain unjustified use of fire and rehire; and fails to include any measures (1) contained in the Employment and Trade Union Rights (Dismissal and Re-engagement) Bill [HL], or (2) recommended by the International Labour Organization Committee on Freedom of Association’s Definitive Report 404 published in October 2023 on the matter of dismissals of 786 staff by P&O Ferries Limited”.

My Lords, I do not intend to repeat the arguments made earlier this month at the Second Reading of my Private Member’s Bill. However, I must again put on record my sincere belief that, irrespective of the comments the Minister has just made, the Government’s proposed code of practice is utterly toothless. It will do nothing to end the fire and rehire abuses taking place in this country.

Quite simply, I regret that the code does not impose any new legal duties on exploitative employers. I regret that it does not ensure that fire and rehire is used only as a last resort to prevent a business going bust—that is not the case out there in the field. I also regret that it does not make it any easier for workers or their unions to seek justice at an employment tribunal. My Bill would do all this.

The code imposes a paltry 25% uplift in any compensation which abused workers can claim, and that is only if they can win an unfair dismissal claim. That was hard to do at the best of times, even before the increase in fees.

It is clear that this code of practice is a fig leaf to cover the Government’s inaction and lack of any real desire to address the shameful practice of fire and rehire. It simply is not good enough. The working people of our country deserve much better.

I thank the noble Lord, Lord Johnson, for being kind enough to write to me following our Second Reading debate. If I may, I will address some of the points he made in his letter to me.

As the Minister correctly pointed out, my Bill provides that, when an employee has been dismissed because they have refused to agree to a variation in contractual terms, the employer would not be able to rely on some other substantial reason as the reason for dismissal. Some other substantial reason, or SOSR as it is known by employment rights experts, is the gaping loophole I referred to at Second Reading, which allows bad bosses to ride roughshod over workers’ rights. Closing this loophole is a key purpose of my Bill, but I do not agree with the Minister in his logic when he writes:

That aside, my Bill makes specific provision for genuine situations of last resort, when a company simply cannot afford not go ahead and cut wages and

“there is a real threat to continued employment”

in the light of

“the economic situation affecting the employer”.

I agree with that, and my Bill is clear on that. If an employer does their level best, given the circumstances, to fulfil the two obligations of consultation and disclosure, they have little to fear from using fire and rehire to reduce wages to the extent necessary to ensure economic survival of the company.

This gets us to the heart of the matter. The Government agree that fire and rehire should be used only as a last resort, but the code contains no measures to ensure that that is the case. It is, as I have said once already, utterly toothless. On the other hand, my Bill has teeth and can bite. Instead of the limited awards for unfair dismissal normally available, my Bill would allow for amounts such as the employment tribunal considers just and equitable—that is, it is uncapped, which may make a greedy employer think twice before they unfairly sack people. However, it does not ban fire and rehire in all circumstances, as the Minister suggested. That is an important point, which I do not believe that the Government have fully grasped.

The Minister responded to my question at Second Reading about whether the code would have prevented some of the most notorious examples of fire and rehire. I raise the bitter disputes at British Airways and British Gas, and now at Heathrow Airport, where Border Force staff just last week voted 90% in favour of strike action over enforced roster changes that would mean, effectively, a 20% pay cut for each and every one of them. The Minister replied that he was unable to comment on specific cases, but I suggest that the answer is that the code would not have stopped these abuses, or any similar ones, nor would it have stopped the appalling abuses by P&O Ferries two years ago. A number of sacked seafarers were rehired on worse pay and terms and conditions, although many where not; even today—the Minister may not know this—new hires are on less than £5 an hour. That is scandalous; it is not even the minimum wage, and it is happening right now.

The ILO report referred to in the amendment before noble Lords makes a number of recommendations to the Government, including that we should

“ensure mutual respect for the commitment undertaken in collective agreements … overcome challenges regarding the legislative prohibition on sympathy strikes”,

and ensure