We expect that an employer’s ability to “Fire and Rehire” will soon be dead.
Clause 26 of the Employment Rights Bill introduces a new section to the Employment Rights Act 1996 which makes it automatically unfair to dismiss an employee for refusing a contractual change.
Not “possibly unfair” and not “up to the tribunal” – just automatically unfair.
This one change – which we anticipate could come into force as early as October 2025 – will transform the employment law landscape. The traditional “last resort” that employers and HR professionals have long relied on to push through necessary changes is about to disappear.
In recent conversations with other clients, we have been explaining the practical implications of this significant change.
For example, if an employer wants to withdraw a contractual commission scheme and the employee says no, they can’t be dismissed. If a major client changes its service hours and the employer needs to adjust staff rotas, it can’t enforce the change through dismissal and re-engagement. Even if new regulations demand a contractual update and the employee refuses, dismissal isn’t an option. Unless the business is genuinely on the brink of collapse and can prove it.
That’s the only exception that will be allowed. It’s a defence that demands documented financial distress and clear evidence that there was no other option.
And even if an employer satisfies this narrow test, the dismissal still has to survive a reasonableness test under long established unfair dismissal principles. That includes proof of consultation, efforts to obtain agreement and consideration of alternative options.
We think there are two possible ways employers might attempt to navigate this. One is relying on variation clauses in contracts. The other is outsourcing to agencies. However, both come with legal risks and are unlikely to offer a reliable strategy.
With the “stick” of dismissal gone, employers are only left with the “carrot.” That means better communication, smarter consultation and genuine negotiation with staff. It means demonstrating the business case, offering give-and-take and investing in people skills over positional power.
This really is not going to be a minor tweak. This is going to be a wholesale change in how employers and employees relate to each other over contractual changes.
Do get in touch if we can help and, in the meantime, have a very Happy Easter!