Tesco has faced a significant legal setback after the Supreme Court ruled against its use of “fire and rehire” tactics, specifically in relation to changes in pay terms for warehouse employees. In 2007, Tesco had re-organised its warehouses resulting in mass relocations. As an alternative to redundancy, Tesco negotiated with UDAW that it would give staff that stayed and relocated a ‘Retained Pay’ (‘RP) payment which would be paid to them each month. In 2021, Tesco attempted to remove RP by terminating those employees’ contracts and then rehiring them on new terms and conditions which excluded RP. This was challenged by USDAW, leading to an injunction being issued by the High Court preventing Tesco from proceeding with its plan.
Tesco appealed this and the injunction was overturned by the Court of Appeal. USDAW then appealed to the Supreme Court which ultimately sided with USDAW, declaring that Tesco’s actions violated the intended mutual understanding of the employment contracts, which included the RP as a permanent feature. The ruling emphasized that Tesco could not unilaterally terminate contracts to alter pay terms for its benefit.
This ruling may have far-reaching implications for employment practices in the UK, specifically regarding the practice of fire and rehire. It highlights that employers may need to adopt more collaborative discussions with employees when seeking to implement changes to contracts. The UK government earlier this year, published a Code of Practice of Fire and Rehire practices, which encouraged such an approach.
The decision also comes at a time when the Labour Party is proposing further legislation to prohibit such tactics, against suggesting a broader shift in favour of employee rights in the workplace. While some legal professionals still find ‘fire and rehire’ a useful strategy under certain conditions, others warn that this ruling signals a substantial shift in the balance of power toward employee protections, that we may see more of in future decisions and legislation.
For the full judgement click here:
https://www.supremecourt.uk/cases/docs/uksc-2022-0133-judgment.pdf
Author: Kate Woosnam, Lead Associate
