Updated Draft Code of Practice on Dismissal and Reengagement

Louise Walker
Legal Director
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By way of reminder, contracts of employment, whether in writing or verbal, are legally binding and their terms cannot usually be changed by just one party. Instead, changes will usually need to be agreed by both the employer and the employee.

If agreement is not reached on some or all changes proposed by an employer, the employer may, notwithstanding the potential risks arising, and as a last resort, decide to dismiss employees, before either offering to re-engage them, or offering to engage other employees, in substantively the same roles, in order to effect the changes. This is referred to as “dismissal and reengagement”.

The Government has recently updated the draft Code of Practice on Dismissal and Reengagement following a consultation on the Code which ended in April 2023 (see our previous JEL alert on the draft Code of Practice, here). The Code is to apply regardless of how many employees are affected by an employer’s proposals.

The updated Code still recognises that it is for an employer to make economic decisions for the benefit of the business and to set the strategic direction of the business and that this may occasionally lead the employer to consider proposing changes to its employees’ contracts of employment. However, the updated Code provides more clarity in certain areas and makes it more accessible, including by significantly reducing its length and removing any unnecessary technical terms.

The key changes to note on the draft Code are:

• The previous draft Code of Practice excluded redundancy situations. Whilst this remains the case where redundancy is the only consideration, the Government has amended the Code to clarify that it will apply in scenarios where the employer is envisaging both redundancy and dismissal and reengagement in respect of the same employees.
• The draft Code has been amended to provide that in circumstances where an employee is not prepared to accept contractual changes, the employer is simply required to re-examine its plans (rather than both its plans and business strategy as required by the previous draft Code), taking into account feedback and suggested factors.
• The Government has amended the Code to state that it is best practice for any information shared with employees to be put in writing.
• The Government has strengthened the obligations contained in the previous draft Code regarding when employers should contact Acas. Employers now must contact Acas before raising the prospect of dismissal and reengagement with employees (rather than in circumstances where they are unable to reach agreement with employees about dismissal and reengagement).
• The Government has amended the Code to clarify that if employers expect to opt for dismissal and reengagement then they must be clear about that fact to employees. However, the Code has made it clear that employers must not raise the prospect unreasonably early or use dismissal and reengagement as a negotiating tactic where they are not envisaging dismissal.
• The updated draft Code now states that it is good practice for employers to invite feedback about proposed changes to terms and conditions and consider what might be done to mitigate any negative impacts on employees.

The Codes does not impose legal obligations on employers, however, similar to the case in respect of the ACAS Code of Practice on Disciplinary and Grievance Procedures, Employment Tribunals will take the Code into account when considering relevant cases, for example, cases of unfair dismissal. If an employer is found to have unreasonably failed to follow the Code, the Tribunal will have the power to increase an employee’s compensation by up to 25%.

The Code is currently awaiting Parliamentary approval and is expected to come into force by Summer 2024. If you would like to read the updated draft Code of Practice, you can access it here.

If you would like to discuss the changes to the draft Code of Practice, or if we can provide support or assistance on any other employment law matters, please do not hesitate to contact a member of the team on 0141 331 5150.

Topics: Dismissal and Re-engagement