The fire and rehire restrictions under ERA 2025 come into force on 1 January 2027. If you were dismissed and rehired on worse terms before that date, the current law applies. If on or after 1 January 2027, read on.
What Is Fire and Rehire
Fire and rehire -- formally called dismissal and re-engagement -- is the practice of an employer dismissing an employee and then offering to re-employ them on different, usually inferior, terms and conditions. Before ERA 2025, this practice was controversial but largely lawful as long as the employer followed a fair process. The Supreme Court in USDAW v Tesco confirmed that injunctions restraining fire and rehire were not generally available, leaving dismissal unfair claims as the primary remedy.
What ERA 2025 Changes
ERA 2025 makes dismissal automatically unfair where the reason or principal reason for dismissal is that the employer wanted to make changes to the employee's terms and conditions and the employee refused to agree to those changes -- but only where the changes relate to restricted variations. This applies to dismissals on or after 1 January 2027.
The concept of restricted variations is central to understanding the new law. Restricted variations are changes to certain core employment terms. The precise list is being confirmed by secondary legislation but early indications point to changes to pay, hours, and location of work as falling within the restricted category. Changes to other terms -- for example, changes to discretionary benefits or non-core contractual terms -- may not be restricted variations and therefore may not trigger the automatically unfair regime.
What Remains Lawful
ERA 2025 does not ban fire and rehire entirely. Where an employer is in genuine extreme financial distress -- the Act uses this specific phrase -- dismissal and re-engagement may still be lawful even for restricted variations, provided the employer complies with the ACAS Code of Practice on dismissal and re-engagement. The financial distress exception is narrow and employers relying on it will need to demonstrate genuine and serious financial difficulty.
Where the proposed variation does not involve a restricted variation -- that is, where it relates to a non-core term -- dismissal and re-engagement remains potentially fair subject to the usual reasonable response test.
What This Means for Employees
If you are dismissed on or after 1 January 2027 because you refused to accept changes to your pay, hours, or location of work, and the employer then offers to re-engage you on the new terms, the dismissal may be automatically unfair. Automatically unfair dismissal has no qualifying period and uncapped compensation. You should contact ACAS immediately to start early conciliation and calculate your time limit.
The key questions will be: does the change relate to a restricted variation, was the reason for dismissal your refusal to accept the change, and does the financial distress exception apply? Each of these will be fact-specific and the case law on ERA 2025 will develop over time.