25th September 2024
Supreme Court Rules That Tesco Cannot ‘Fire And Rehire’ Workers
The UK Supreme Court has unanimously ruled to restore an injunction granted by the High Court that prevents Tesco from terminating and re-engaging workers to end their right to ‘retained pay’ benefit.
Background
In 2007, Tesco reorganised its distribution centres, resulting in a number of sites closing. To avoid losing experienced employees to redundancy, Tesco sought to incentivise these employees to relocate. It negotiated with the union, Usdaw, and agreed to pay an enhancement known as “Retained pay”, as opposed to a redundancy payment.
In a joint statement with USDAW in 2007, Tesco described Retained Pay as “guaranteed for life”. In communications with its staff, it explained that so long as an employee was employed in their current role, Retained Pay would increase each year in line with any general pay rise, so long as the employee was engaged in their current role. In a collective agreement from 2010, it described Retained Pay as a “permanent feature” of an employee’s contract entitlement. ‘Retained pay’ was described as a contractual right which could only be changed by mutual consent.
Timeline
2021: Tesco seeks to remove retained Pay
In 2021, Tesco announced it planned to remove Retained Pay. Tesco offered affected employees an advance of 18 months of Retained Pay to agree to the termination of their Retained Pay rights. Workers who declined would be dismissed and then re-engaged, but their right to retained pay would be removed: ‘firing and rehiring’.
Feb 2022: Ruling in favour of Usdaw
In February 2022, the High Court ruled that the benefit was “guaranteed for life” and issued an injunction to prevent Tesco from issuing termination notices. The case was brought by Usdaw on behalf of 42 Tesco workers.
Jul 2022: Tesco wins an appeal
In July 2022, Tesco won an appeal against the injunction. The Court of Appeal found that the references to “permanent” retained pay only meant that retained pay was guaranteed for the length of a particular contract of employment.
Sep 2024: Supreme Court restores the injunction to prevent ‘fire and rehire’
Usdaw appealed to the Supreme Court to contest the decision to overrule the injunction and prevent Tesco from terminating the contracts. The Supreme Court unanimously allowed the appeal and restored the injunction granted by the High Court. The court ruled that the workers’ contracts contained a term implied by fact, with the effect that Tesco could not attempt to deprive their employees of the right to retained pay by terminating their employment.
This ruling means that Tesco cannot ‘fire and rehire’ the distribution workers who receive retained pay.
Potential implications for employers
This was an unusual case. It is rare for an employer’s otherwise qualified right to terminate employment to be qualified by an implied term.
The unique nature of this judgement is an important consideration amidst a climate of increasing criticism of ‘fire and rehire’, i.e. termination and re-engagement. With the Labour government proposing changes to ‘fire and rehire’ in their manifesto and growing controversy around ‘fire and rehire’ following the pandemic, it may seem that the climate is shifting against ‘fire and rehire’ policies.
In light of this, employers may worry about what this judgement means for their ability to renegotiate contracts based on business needs. However, this judgment a) does not mean that employers cannot necessarily terminate contracts and then re-engage workers, and b) relates to an unusual set of facts and a specific issue of the idea of the ‘permanence’ of a contractual term. However, it should remind employers to set clear parameters when introducing new benefits and to be specific about the conditions that apply.
“tesco slough” by osde8info is licensed under CC BY-SA 2.0 
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