NEWS EXTRA IN THE FIRING AND RE-HIRING LINE


New laws are coming in to prevent employers from firing people, only to rehire them on revised, usually worse, terms.


THE CONTROVERSIAL PRACTICE of ‘Fire & Rehire’ – where employers dismiss staff and re-engage them on revised terms – has long sparked debate. But for many small to medium-sized construction and building supply businesses, it’s been a practical way to respond to changing demands, new contracts, and tighter margins.


However, major changes are coming. Under the forthcoming Employment Rights Bill, which could take effect as soon as October 2025, Fire & Rehire will be effectively banned in most cases. That means building firms need to prepare now – or risk serious legal, financial, and reputational damage.


What are the rules? At the heart of the Employment Rights Bill is the principle that employers must not use dismissal and re-engagement to force through contractual changes. The key changes include: • Automatic unfair dismissal if an employee is let go for refusing to accept new terms. • Mandatory consultation: employers must meaningfully consult staff about any proposed contractual changes. • New statutory Code of Practice: not legally binding, but if you don’t follow it, employment tribunals can increase compensation awards significantly. In construction and the wider building materials sector, flexibility is vital. Workflows shift with seasonal demand, client requirements evolve, and contracts can rise or fall with little notice. It’s not uncommon for firms to need to revise staff hours, shift patterns, or roles to remain competitive. Historically, if an employee refused new terms – for example, a change in hours or job function – businesses could lawfully dismiss them and offer a new contract


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under different terms. That won’t be a lawful option for much longer. Once the new law is in force, dismissals made solely because an employee refuses to accept new terms will automatically be unfair. This dramatically narrows what firms can do when they need to restructure or adapt employment contracts.


Fire & Rehire?


Employers may still be able to use Fire & Rehire if two strict conditions are met:


1. The changes are essential to address serious financial difficulties that threaten the future of the business.


2. No other reasonable alternatives to contract changes exist.


This is a high bar. You’d need to show that you’ve considered all other cost-saving or restructuring options – and still can’t avoid making changes to survive financially.


Examples that might qualify: Facing insolvency unless wages are reduced or roles merged. A sudden loss of key contracts where existing staffing models become unsustainable. Even then, you must


demonstrate genuine consultation with employees and explore voluntary solutions first. Simply handing out new contracts or suggesting redundancy alternatives won’t be enough.


Common workarounds Attempting to disguise Fire & Rehire as redundancy will attract close scrutiny from employment tribunals. If a dismissal is revealed to be motivated by a desire to change terms, rather than eliminate a role, the outcome will likely be a finding of unfair dismissal.


Variation clauses within existing contracts also offer limited


protection. These clauses cannot be used to impose changes unilaterally without consultation, particularly if those changes are disadvantageous to the employee. Tribunals have historically treated such actions with scepticism and are likely to be less forgiving under the new legislation.


Dismissal and replacement with agency workers may seem appealing but is fraught with complications. The cost of agency labour can easily offset any perceived financial gain. Additionally, large-scale replacement could trigger TUPE protections, where new workers inherit old terms. Unions, clients, and the public are also likely to take a dim view of this approach, resulting in reputational damage that may outweigh any short-term benefit.


Even if not explicitly unlawful, these tactics could all be found non-compliant with the incoming Code of Practice. Employers who ignore its guidance risk harsher outcomes at tribunal, including increased compensation awards. Firms that dismiss employees for rejecting contract changes after the law comes into force face a much greater chance of being sued for unfair dismissal. Courts will examine not just the reasons for dismissal, but also the employer’s process. Where there was no


proper consultation or the Code of Practice was disregarded, penalties are likely to be higher.


This isn’t just about legal fees. Tribunals may issue protective awards or extended compensation. These costs can be crippling for SMEs in the building and trade sectors. Just as seriously, mishandled dismissals can tarnish a business’s reputation, making it harder to win contracts or recruit skilled labour.


What firms should do To get ahead of these changes, SMEs should take action now, while there’s still time to implement contract changes under the current framework. The following steps are key: • Audit your contracts: Identify problematic clauses and seek legal advice where needed. • Assess upcoming changes: If shift patterns, job roles or site locations may change, plan now. • Consult meaningfully: Talk to employees, invite feedback, and offer voluntary solutions where possible. • Train your managers: Ensure HR and site leads understand the new Code and how to apply it. By taking decisive action now, firms can avoid disruption, stay compliant, and maintain goodwill with their workforce - all essential for surviving and thriving in a sector where adaptability must go hand- in-hand with fairness.


BMJ


James Twine is Partner and Head of Business Services at Wolferstans, a leading South West law firm with a history going back to 1812. Wolferstans provides a wide range of legal services to meet the needs of individuals, families, SME’s, public sector and voluntary organisations based throughout Devon and Cornwall.


www.buildersmerchantsjournal.net June 2025


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