Fire and Re-hire

Summary: Supreme Court re-instates injunction preventing Tesco from using fire and re-hire to remove ‘permanent’ right to retained pay.

In USDAW and others v Tesco Stores the Supreme Court looked-at a decision by Tesco to terminate certain employment contracts which included an entitlement to ‘Retained Pay’, described as a ‘permanent’ benefit, and to offer re-engagement on terms without Retained Pay.

Tesco had, in 2007, re-organised its warehouses resulting in mass relocations. As an alternative to potential redundancy Tesco negotiated with USDAW that it would give any staff who stayed on and agreed to be relocated a ‘Retained Pay’ payment which would be paid to them each month. ‘Retained Pay’ was described in the contracts of employment as permanent. In 2021 Tesco attempted to remove Retained Pay by firing and re-hiring on new terms which excluded Retained Pay.

USDAW initially got an injunction from the High Court preventing Tesco from terminating the impacted contracts of employment. The High Court held that the contracts of employment were subject to an implied term that Tesco could not terminate the contracts for the purpose of removing Retained Pay. This decision was overturned by the Court of Appeal who held that no such implied term existed; Tesco had the right to give notice in the ordinary way, and the entitlement to Retained Pay would only last as long as the particular contract endured.

USDAW appealed this decision to the Supreme Court. The Supreme Court, re-instating the injunction and overturning the Court of Appeal’s decision, held that Tesco’s right to terminate the employment contract by giving the requisite notice was qualified by a term implied by fact that Tesco’s right to dismiss could not be exercised for the purpose of depriving employees of the right to Retained Pay.