Tesco has lost its Supreme Court ‘hire and fire appeal’ as the judge ruled it cannot terminate staff employment contracts and offer to rehire them on less favourable terms.
Shopworkers’ union Usdaw took legal action against the supermarket giant after it tried to strip some warehouse workers of their higher pay by ending their contracts and offering to rehire them, in a long-running legal battle between the pair.
The Supreme Court unanimously ruled today (12 September) that Tesco was not permitted to use the ‘fire and rehire tactics to take away their right to “retained pay” and restored an injunction preventing the retailer from doing so.
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In 2022, Usdaw secured an injunction that stopped Tesco from dismissing warehouse workers and offering them new contracts.
Tesco later successfully appealed against the decision the same year, but the Supreme Court has now reversed that ruling.
Usdaw members employed by Tesco in its Daventry and Litchfield Distribution Centres previously won a landmark legal victory against the supermarket in 2021 after it had proposed to remove “retained pay”, which the union claimed dismissed staff and offered to re-engage them on “inferior” terms and conditions.
The supermarket giant pursued the case further to the Court of Appeal and the original ruling was overturned a year later.
The judgment backed by Lord Reed, Lord Leggatt and Lord Lloyd-Jones, Lord Burrows and Lady Simler said: “Objectively, it is inconceivable that the mutual intention of the parties was that Tesco would retain a unilateral right to terminate the contracts of employees in order to bring retained pay to an end whenever it suited Tesco’s business purposes to do so.”
“This would have been viewed, objectively, as unrealistic and as flouting industrial common sense by both sides.
“It would have been open to Tesco to negotiate a longstop date for the entitlement to retained pay or to make clear that the retained pay could be withdrawn if an employee were dismissed with notice and then re-employed in the same role. Neither was done.”
A spokesperson for Tesco said the supermarket accepted the Supreme Court’s judgement.
“Our colleagues in our distribution centres play a really critical role in helping us to serve our customers and we value all their hard work. Our objective in this has always been to ensure fairness across all our DC colleagues.”
“Today’s judgment relates to a contractual dispute brought on behalf of a very small number of colleagues in our UK distribution network who receive a supplement to their pay.
“This supplement was offered many years ago as an incentive to retain certain colleagues and the vast majority of our distribution colleagues today do not receive this top up. In 2021, we took the decision to phase it out.
“We made a competitive offer to affected colleagues at that time, and many of them chose to accept this. Our aim has always been to engage constructively with Usdaw and the small number of colleagues affected.”
Usdaw general secretary Paddy Lillis said: “Usdaw has been determined to stand by its members in receipt of this valuable benefit that constituted a key component of their pay. We recognised that they had been afforded this payment because of their willingness to serve the business and it was on that basis that we agreed with Tesco that it should be a permanent right.
“When we said permanent, we meant just that. We were therefore appalled when Tesco threatened these individuals with fire and rehire to remove this benefit. These sorts of tactics have no place in industrial relations, so we felt we had to act to protect those concerned.
“We were very disappointed with the outcome in the Court of Appeal but always felt we had to see this case through. We are therefore delighted to get this outcome, which is a win for the trade union movement as a whole.”
Neil Todd, partner at law firm Thompsons Solicitors, which represented Usdaw added: “This decision illustrates that a court will intervene to give effect to the parties’ intentions when entering into a contract. It also demonstrates that a right to an injunction is available regarding a breach of contract of employment when damages are not an adequate remedy, as was the case here.”
“The injunction will prevent this important right from being stripped away. The litigation has been hard fought, but we are delighted to achieve an outcome that we consider just in all circumstances.”
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