A union has won a Supreme Court battle against Tesco over so-called proposals to “fire and rehire” workers on less favourable terms.
The Union of Shop Distributive and Allied Workers (Usdaw) took legal action over the supermarket chain’s proposals to fire staff at some distribution centres and rehire them on lower pay in 2021.
After the High Court ruled in the union’s favour in 2022, Tesco successfully appealed against the decision the same year.
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
The union then took the case to the country’s highest court, with five Supreme Court justices ruling unanimously on Thursday that Tesco should be blocked from dismissing the staff.
The case arose after Tesco planned to close some of its distribution centres in 2007, and offered staff increased “retained pay” for them to relocate.
In 2021, the chain wished to bring “retained pay” to an end and told staff that the enhancement would be removed in return for a lump sum, or their contracts would be terminated and then reoffered on the same terms, but without the increased salary.
Usdaw argued that “retained” pay was described as “permanent” in the staff’s contracts, meaning it could not be removed.
Tesco argued that bosses were using a “contractual mechanism” open to employers.
But in a 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Tesco to negotiate a longstop date for the entitlement to retained pay or to make clear that the retained pay could be withdrawn if an employee were dismissed with notice and then re-employed in the same role.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.”
The Government has previously outlined plans to ban “fire and rehire” policies and exploitative zero hours contracts, as well as enforce more rights from a worker’s first day in a job, including sick pay.
