Tesco has lost its ‘hire and fire’ appeal after the Supreme Court ruled it cannot terminate its employees’ contracts for the purpose of depriving them of retained payment.
The judge said that employees’ contracts contained a clause barring the supermarket giant from removing their right to retained pay.
The ‘landmark’ legal battle was initially brought in 2021 by employees of Tesco’s Daventry and Litchfield distribution centres, along with the trade union Usdew.
The case claimed that the grocer had dismissed staff and offered to re-engage them on “inferior” terms and conditions – in this case, the absence of retained pay.
Retention pay is a one-time payment given to an employee to encourage them to stay with a company.
Tesco had offered this bonus to staff willing to relocate from closing centres to new centres in different locations in 2007, but attempted to remove this clause from employees’ contracts in 2021 by firing and rehiring them on an updated contract.
Usdaw argued that “retained” pay was described as “permanent” in the staff’s contracts, and was therefore illegal to remove.
The High Court had ruled in Usdaw’s favour in 2022, but Tesco successfully appealed the decision in the same year. The union then took the case to the country’s highest court, culminating in today’s decision.
Patrick Howarth, Partner at Foot Anstey, said that the case is “important” and an “evident victory” for Usdaw, but that “retailers and other employers should not be concerned that their right to change terms of their employees’ contracts has been removed. It hasn’t.”
“The most important takeaway for employment professionals and HR teams for this case is that communications between unions, employers and employees issued during consultation were held to be relevant to the interpretation of what particular contractual terms actually meant.”
“This case has been wrongly painted with the same brush as a number of the fire and re-hire cases hitting the headlines recently, with the facts of the case expanding beyond this.”
A spokesperson for Tesco said the supermarket accepted the Supreme Court’s judgement.
They added: “Our colleagues in our distribution centres play a really critical role in helping us to serve our customers and we value all their hard work. Our objective in this has always been to ensure fairness across all our DC colleagues. Today’s judgement relates to a contractual dispute brought on behalf of a very small number of colleagues in our UK distribution network who receive a supplement to their pay.
“This supplement was offered many years ago as an incentive to retain certain colleagues and the vast majority of our distribution colleagues today do not receive this top up. In 2021, we took the decision to phase it out. We made a competitive offer to affected colleagues at that time, and many of them chose to accept this. Our aim has always been to engage constructively with USDAW and the small number of colleagues affected.”