Court of Appeal Overturns Tesco's 'Fire and Re-Hire' Injunction

Awarding and Removing Staff Retained Pay

In the case of USDAW and others v Tesco Stores Ltd, Tesco was seeking to remove retained pay from employees who had previously been taken through a business re-organisation between 2007 and 2009. During that exercise, Tesco had awarded staff retained pay as a relocation incentive and as an alternative to redundancy.

In January 2021, Tesco announced its intention to remove the retained pay. It offered a lump sum in order to secure the agreement of affected staff. Tesco said it would dismiss and re-engage any staff who refused the offer. The trade union USDAW successfully applied to the High Court seeking an injunction to prevent Tesco from terminating affected staff contracts. Tesco appealed to the Court of Appeal.

What Did the Court of Appeal Say?

The Court of Appeal has now overturned the High Court decision. It commented on the extent to which the retained pay could be said to be a permanent staff benefit. The High Court had found there was a clear understanding that the retained pay would remain in place for the duration of affected staff employment. However, the Court of Appeal did not agree. There was no evidence that the possibility of Tesco seeking to 'fire and re-hire' was taken into consideration as part of the earlier conversations about the retained pay and how long it would remain in place. The retained pay provisions were not time limited under the relevant contracts of employment, but the contracts also did not provide for the retained pay to continue indefinitely. The Court of Appeal held this was sufficient for Tesco to be able to give notice in the normal way in order to bring a given contract to an end in order to remove the retained pay. The Court of Appeal also held it would not be appropriate to grant an injunction. It was unaware of any other case where a court has granted an injunction to permanently stop a private sector employer dismissing an employee.

What Can Employers Learn From This Decision?

This decision clears up the confusion caused by the High Court case. It demonstrates the reluctance of the courts to interfere in the commercial decisions of private sector businesses, where those decisions are carried out in a way that is consistent with the underlying contract. The parties could perhaps have avoided the dispute had they introduced more certainty into the relevant contractual clause, particularly in light of the conversations that were said to have taken place at the time about how long the retained pay would remain in place.

We are still expecting the Government to publish a new statutory code on 'fire and re-hire' practices later this year. The code is likely to contain guidance for employers on how to fairly conduct business re-organisations involving changing staff terms and conditions of employment.

For more information on 'fire and re-hire' practices, please contact Helen Hughes, from our Employment team, on 07741 312 352, or complete the form below.