Fire and rehire
The ERA 2025 provides that employees who refuse a “restricted variation” to their contract and are subsequently dismissed and re-engaged can claim automatic unfair dismissal. A restricted variation is a contractual variation relating to:
-pay;
-working hours;
-shift times and length;
-time off;
-pension rights; or
-the introduction of a variation clause relating to a restricted term.
The original draft Employment Rights Bill had proposed making dismissal and re-engagement automatically unfair in the context of any contractual variation, but this was subsequently limited to the restricted variations listed above.
Importantly, employers are prohibited from varying existing contracts to impose unilateral variation clauses that relate to one of the restricted variations above, such as a new clause in the contract which provides for the employee “to work such shifts as required in accordance with the needs of the business”.
An employee will also be treated as automatically unfairly dismissed if they are replaced by self-employed independent contractors, workers who are not employees, agency workers or any other individuals who are not employed by the employer but who do substantially the same work. This is intended to prevent scenarios such as that which arose at P&O Ferries where the employer sacked workers without notice and replaced them with temporary staff on much lower rates of pay.
A dismissal will not be automatically unfair if the employer is in extreme financial difficulties. This exception should be construed narrowly. An employer will also have to comply with the Code of Practice on dismissal and re-engagement, which is to be updated in light of the ERA 2025.
An employee dismissed for refusing changes imposed by the employer which are not restricted variations, e.g. relating to location or job duties, may still be unfairly dismissed, but such dismissals will not be automatically unfair. In such cases, in considering the fairness of the dismissal, the employer will be required to show the reason for the variation, whether they consulted with the individual and appropriate representatives (which will be the Union if recognised) and what if anything was offered in return for the change. Where a dismissal is not automatically unfair because of a financial distress exception, the dismissal may still be unfair based on ordinary unfair dismissal principles.
The government is currently consulting on expanding the definition of restricted variation to cover variations concerning expenses, benefits and shift patterns. The consultation closes on 1 April 2026.
The provisions on fire and rehire are due to come into force in October 2026.
Visit our main Employment Rights Act Hub for further information.