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Tesco warehouse workers who challenged the retailer’s use of controversial “fire and rehire” tactics have won their case after the UK Supreme Court overturned an earlier ruling.
Usdaw, the shop workers’ union, brought the case on behalf of members who had been given a “permanent” entitlement to a supplement to their pay if they agreed to relocate to a new site in 2007 — only to be threatened with dismissal and re-engagement on worse terms in 2021 unless they agreed to forgo it.
The Supreme Court on Thursday said the implied terms of the employees’ contracts meant Tesco could not exercise its right to terminate their employment purely to deprive the employees of their right to this supplement.
For many workers concerned, it was a substantial proportion of overall pay.
The Supreme Court also upheld an initial High Court decision to grant an injunction preventing Tesco firing and rehiring the employees, saying that in this case it would have been impossible to calculate damages correctly. The High Court injunction had previously been overturned on appeal.
Neil Todd, a partner at Thompsons Solicitors, which represented Usdaw, said the judgment was a “fantastic outcome” and would prevent an important right being stripped away.
But he added that the case showed how difficult it was for workers to enforce their rights through the courts and the importance of legislative change to make it harder for employers to adopt “fire and rehire” tactics.
The government has promised to address the tactics, where employees are threatened with dismissal if they do not accept changes to their contract, as part of a sweeping package of reforms to workers’ rights.
Paddy Lillis, Usdaw general secretary, said the tactics had “no place in industrial relations” and that the union had been “appalled” by Tesco’s threat to remove a benefit explicitly described as permanent. “When we said permanent, we meant just that,” he added.
Employers’ use of fire and rehire has come under the spotlight since the Covid-19 pandemic.
Many companies argued during the health crisis that they needed to cut labour costs in order to stay afloat, while unions accused employers of using the economic downturn as an excuse to downgrade terms of employment.
The government’s vow to “end the scourges of fire and rehire and fire and replace” is likely to be one of the most contentious elements of its “Plan to Make Work Pay”, with draft legislation promised within its first 100 days.
Unions want to see an outright ban, but business groups say fire and rehire is sometimes necessary, as a last resort, to prevent a company going under. If it were banned, employers would simply fire staff without the offer of re-engagement, business groups say.
Todd said that while the ruling on Tesco was unlikely to have wider consequences because it was unusual for contracts to contain such a clear provision that a benefit was “permanent”, it showed the need for tougher laws.
“It is far too easy for a perfectly profitable company to decide it wants to dismiss its staff and re-engage them on less favourable terms,” he said, adding that courts should have greater powers to examine the economic context of employers’ decisions and the degree of financial pressure.
Tesco said it accepted the court’s judgment, which related to a dispute brought “on behalf of a very small number of colleagues” that dated back many years. The aim had been to “ensure fairness” across its workforce, and it had made a “competitive offer” at the time to compensate staff for the loss of the supplement, which many accepted, the retailer added.
“Our aim has always been to engage constructively with Usdaw and the small number of colleagues affected,” Tesco said.
The Department for Business and Trade said the government was committed to updating employment protections and would soon bring forward legislation to put an end to “unscrupulous” fire and rehire practices, which had “no place in a modern labour market”.
