Amendments to the Fire and Re-hire provisions
Following on from his previous article on the Employment Rights Bill’s (ERB) provisions aimed at implementing the Government’s commitment to end ‘unscrupulous fire and re-hire tactics’, Ross Hutchison looks at the government’s proposed amendments on the issue and reports what has changed.
A reminder
Currently, should an employer wish to change the contractual terms of its employees, and the employees do not agree, it can dismiss and re-engage the employees on new terms, under the ‘some other substantial reason’ (SOSR) potentially fair reason for dismissal, as long as it is a substantial reason, and they adopt a reasonable process.
How did the original ERB address the issue?
In essence, the original ERB provided that any dismissal of an employee for failing to agree a contractual amendment will be automatically unfair unless the employer can show that the ‘Exception’ below applies:
- the employer’s business was in immediate financial peril (such that it may not have been able to continue as a going concern); AND
- the employer could not have reasonably avoided the need to make the variation.
Even if an employer is able to establish the limited circumstances for the Exception to apply, normal fairness principles would also need to be considered.
What do the Bill amendments change?
On 07 July 2025, the government proposed several important but complex amendments to the fire and rehire clauses of the Bill (as well as others), just in time for the end of the House of Lords Committee Stage. Overall, whilst it represents a softening of the fire and re-hire clauses, these amended provisions still represent a significant fetter upon employers’ ability to effect change in their businesses.
We focus on the key amendments proposed:
Limiting what contractual changes will be caught by the automatic unfair dismissal provision (sort of)
Rather than the automatic unfair dismissal provision applying to all dismissals for a failure to agree contractual changes, the proposed change means that it would only apply to those where ‘restricted variations’ had been sought by the employer and refused by the employee. Whilst the Government has set out what these restricted variations are (see below), it has also sought to retain the right to insert additional variations to be covered in the future (to be determined by the Secretary of State in subsequent regulations).
Broadly, the restricted variations (which trigger the automatic unfair dismissal provisions) relate to:
- pay (including pensions);
- hours; and
- holidays.
These are the key, classic collective bargaining issues (and those for which the Central Arbitration Committee (CAC) can impose statutory recognition – which is a different issue, for another time (although if this is of interest, let us know).
In relation to dismissals for refusing to agree variations on other non-restricted contractual terms, whilst they would not be automatically unfair, the government has also introduced a statutory checklist for establishing ordinary fairness. However, this largely covers the areas which would already be considered by an employment tribunal when assessing the issue in ordinary dismissal and re-engagement scenarios, albeit carrying more weight under the ERB due to its statutory force.
It is noteworthy that variations to an employee’s place of work or duties are not included in the restricted variations, so dismissals for not accepting a change to those terms would not be automatically unfair and would be governed by the checklist set out in the paragraph immediately above.
Exception provisions just for the public sector
The Exception provision remains unchanged for the private sector but, the government has now added specific elements to cover public bodies and local authorities, to which the original ‘threat to continuing as a going concern’ scenario would not apply. The new tests for these public sector organisations, which set an equally high bar as that for the private sector, are:
- Public bodies – financial difficulties in the immediate future that affect “the financial sustainability of carrying out the employer’s statutory functions”
- Local authorities – financial difficulties have resulted in a “relevant intervention direction” relating to the financial management or governance of the authority (which is essentially where there has been government intervention).
What don’t the amendments do?
Lots. Of note, however, is the fact that these amendments do not address the concern raised in our previous article on fire and re-hire, regarding the narrowness of the Exception. Specifically, it remains the case that the Exception can only be used if the business as a whole is failing. As such, failing parts would still be caught by the automatically unfair provisions, thereby limiting an employer’s options to take action to turn around that specific area of its operations.
Is the change to ‘restricted variations’ a good thing?
Yes. It means that not all dismissal and re-engagement contractual variations will result in automatic unfair dismissal. However, the restricted variations are often, in practice, the ones which can result in meaningful business/financial change so, overall, clause 26 of the ERB remains a concern and will be unsatisfactory for many employers and their representative bodies.
What’s next?
The Bill has been back in the Lords this week for the Report Stage, the final sitting of which is Wednesday 23 July 2025, and thereafter it will have its Third Reading in the Lords before it passes back to the House of Commons for consideration of the Lords’ amendments. So, we will need to continue to keep a watching brief; but commentary suggests that these amendments, at least, are likely to have the necessary support to be passed.
The government’s roadmap for implementation of the ERB indicates that there is going to be a consultation in Autumn 2025 on the regulations which will support the Bill’s fire and rehire provisions, with a view to the proposals coming into effect in October 2026. However, the scope of that consultation is currently unclear. The scope of the previous consultation on this issue was underwhelming.
If it goes through, what will be the options to force through contractual change?
Unless the limited Exception can be established, our current view is that proposals of redundancy with agreeing variations as an alternative may be the best option. However, this will need to be carefully managed, will require some bold approaches and has the potential for an industrial relations and litigation backlash.
A transfer of undertaking (TUPE) approach will seemingly also be available for some specific circumstances (see our upcoming webinar on pensions changes for an example) but again, will require careful management and is not without risk. Such an approach would also need to avoid other proposed ERB provisions restricting outsourcing as a redundancy substitute.
Employers may consider adding specific and clear variation clauses into contracts before these provisions come into force, which is likely to be beneficial. However, that approach will require a degree of ‘crystal-ball gazing’ as to the specific issues/future circumstances where an individual employer might need to deploy such a clause, as a bland statement that “the employer can change any terms” will not be sufficiently clear.
Watch this space.
Previous insights in our ERB Series
Employment Rights Bill series | July amendments: NDA changes and more (Principal Associate, Louise Singh) 13 July 2025
Employment Right Bill Series: Implementation Roadmap – a long and winding road (Partner, Mark Landon and Principal Associate, Suzanne Nulty) 8 July 2025
Employment Right Bill Series: House of Lords Sittings completed – Report Stage up next! (Principal Associate, Suzanne Nulty) 26 June 2025
Employment Rights Bill Series: The House of Lords Stages so far (Principal Associate, Suzanne Nulty) 6 June 2025
Employment Rights Bill Series: Employment Rights Bill moves from Commons to Lords (Principal Associate, Suzanne Nulty) 25 March 2025
Employment Rights Bill Series continued (Principal Associate, Suzanne Nulty) 7 March 2025
Employment Rights Bill Series: Zero Hours Contracts and Guaranteed Hours: A Zero-Sum policy? (Principal Associate, Louise Singh) 27 January 2025
Employment Rights Bill Series: Small but significant changes to the statutory sick pay system (Principal Associate, Ashley Powis) 13 December 2024
Employment Rights Bill Series: First set of proposed amendments: what it means and what to expect (Principal Associate, Suzanne Nulty) 6 December 2024
Employment Rights Bill Series: Further rules on fair tipping (Principal Associate, Ashley Powis) 3 December 2024
Employment Rights Bill Series: Dismissal and Re-engagement - Tying the Hands of employers? (Legal Director, Ross Hutchison) 22 November 2024
Employment Rights Bill Series: The Fair Work Agency (Principal Associate, Suzanne Nulty) 15 November 2024
Employment Rights Bill Series: The Pendulum Swings on Industrial Relation (Partner Andrew Forrest and Principal Associate, Louise Singh) 8 November 2024
Employment Rights Bill Series: Day 1 right to claim unfair dismissal (Principal Associate, Suzanne Nulty and Associate, Lauren Barchet) 25 October 2024
Employment Right Bill Series – Flexible Working “Further Flexion” (Principal Associate, Suzanne Nulty) 21 October 2024
The Employment Rights Bill Series: 2024 – What’s in, What’s out, and What’s next (Principal Associates, Louise Singh and Suzanne Nulty) 11 October 2024
