Supreme Court decision on Tesco's tactics

The Supreme Court is set to deliver its judgment on Thursday, 12 September, in a pivotal case concerning Tesco Stores Ltd's use of 'fire and rehire' practices. The case addresses whether Tesco was legally entitled to dismiss warehouse operatives to remove a financial benefit known as "Retained Pay," which had been described as a “permanent feature” of their contracts.

In 2007, Tesco and the Union of Shop, Distributive and Allied Workers (USDAW) entered into a collective agreement that included Retained Pay. This benefit was designed to incentivise employees to move to new distribution centers rather than face redundancy. For those who opted to stay with Tesco, this payment became a significant part of their salary.

However, in January 2021, Tesco announced its intention to terminate the Retained Pay entitlement. The company offered employees a lump sum to relinquish their right to the Retained Pay or face dismissal under a “fire and rehire” strategy. Those who did not agree to the buyout would be dismissed and rehired on new terms that did not include the Retained Pay.

USDAW challenged this move, and in February 2022, the High Court granted an injunction preventing Tesco from dismissing employees who refused to forgo their Retained Pay. The court ruled that an implied term in the employees’ contracts prevented Tesco from serving notice to terminate the contracts with the purpose of removing the Retained Pay.

Despite this, the Court of Appeal overturned the High Court's decision in July 2022. The appellate court held that Tesco had the right to terminate contracts by serving notice in the usual manner, and that the Retained Pay entitlement ended with the termination of the contract.

USDAW, represented by Thompsons Solicitors, has appealed to the Supreme Court. The union argues that Retained Pay was a permanent feature of the employees' contracts and could not be lawfully removed through 'fire and rehire' tactics. This appeal raises crucial questions about contractual interpretation and the legality of using such strategies to alter employment terms.

The Supreme Court's judgment will be closely watched as it could set a significant precedent for the use of 'fire and rehire' practices and their impact on contractual commitments. The outcome will likely influence how employers across various industries approach changes to employment terms and conditions in the future.