USDAW Workers win Tesco ‘Fire and Rehire’ case

The UK Supreme Court delivered a pivotal ruling in favor of the retail trade union Usdaw and its members employed by Tesco Stores Ltd. The case concerned Tesco's controversial ‘Fire and Rehire’ scheme, which aimed to remove a contractual benefit known as ‘Retained Pay’ from employees' contracts.

Case Background

The dispute began when Tesco sought to eliminate the Retained Pay, a benefit provided to employees who relocated to new distribution centers as part of Tesco's restructuring. This payment was intended to be a permanent feature of their employment contract in recognition of their commitment during a critical period for the company.

By 2021, Tesco proposed phasing out this benefit, offering employees a lump sum to forfeit their Retained Pay. Those who refused faced termination of their contracts and rehire under new terms excluding the Retained Pay. Usdaw, representing the affected employees, sought an injunction to prevent this tactic, arguing that it violated the permanent nature of the Retained Pay entitlement.

Supreme Court Decision

The Supreme Court's ruling reversed the Court of Appeal's decision from July 2022, which had favored Tesco. Instead, the Supreme Court upheld the High Court's February 2022 decision to grant an injunction against Tesco’s ‘Fire and Rehire’ scheme.

• Implied Term in Contracts: The Supreme Court agreed with the High Court that an implied term needed to be included in the contracts to prevent Tesco from terminating employees specifically to remove their Retained Pay. Lord Burrows and Lady Simler's leading judgment emphasised that such an implied term was essential to uphold the contractual promise of permanent Retained Pay.

• Injunction vs. Damages: The Court found that damages would be an inadequate remedy in this case. Calculating damages would involve speculation and would not compensate for the distress of losing a job or the significant impact of removing a permanent contractual benefit. Therefore, the injunction was deemed appropriate to protect the employees' rights.

Statements and Reactions

• Neil Todd, Partner at Thompsons Solicitors: "This judgment is a significant victory for Usdaw and its members. It underscores that courts will enforce the true intentions of contracts and confirms that an injunction can be granted when damages are not an adequate remedy."

• Paddy Lillis, Usdaw General Secretary: "We are thrilled with this outcome, which is a major win for our members and for the broader trade union movement. This case illustrates that ‘Fire and Rehire’ tactics have no place in industrial relations, and we are proud to have fought for our members' rights."

Background Details

Retained Pay was introduced as part of a collective agreement between Tesco and Usdaw to incentivise employees to stay with the company during a period of significant restructuring. Tesco's attempt to remove this benefit and replace it with a lump sum payment led to the legal challenge, culminating in this landmark Supreme Court decision.

The ruling not only affects the employees directly involved but also sets a precedent for how employment contracts and worker rights are protected against unfair practices in the future.