This long running dispute has finally ended in victory for the union USDAW who fought hard to ensure that its members did not lose a long standing valuable financial benefit through Tesco’s intention to fire and rehire them.
Back in 2007 Tesco undertook a reorganisation of its distribution centres, which involved closing some, expanding others and opening new centres. Tesco and USDAW negotiated Retained Pay as an alternative to lump sum redundancy payments. This was a contractual reward package which gave a monetary value to the difference between the old and new contracts proposed. Tesco made it clear to staff that the Retained Pay would remain for as long as you are employed by Tesco in your current role and importantly it was guaranteed for life.
Move forward some 14 years, Tesco wanted to remove Retained Pay. Affected employees were offered an advance payment equivalent to 18 months’ Retained Pay, after which the benefit would be withdrawn. A number of employees refused to agree this change. As a result, Tesco threatened to dismiss them and re-engage them on new terms and conditions. These days, this practice is commonly referred to as fire and re-hire, something that the new government is keen to stamp out by making legislative changes. See their Employment Bill.
In 2021, USDAW applied for a declaration that affected employees’ contracts were subject to an implied term, which prevented Tesco from exerting its contractual right to terminate for the purpose of removing or diminishing the employees’ right to Retained Pay. They also sought an injection preventing Tesco from terminating protesting employees’ contracts of employment. The High Court agreed with the union, made the declaration sought and ordered an injunction.
Tesco appealed, and the case eventually went to the Supreme Court. Before the hearing, the parties agreed that Retained Pay was a contractual right. Given that Tesco had agreed that this was a payment guaranteed for life and that there was a subsequent collective bargaining agreement that said that the Retained Payment was a permanent feature of an employee’s contract of employment unless removed with the consent of the employee. Given this, the Supreme Court held that it did not follow that Tesco retained a unilateral right to terminate the employees’ contracts in order to end Retained Pay. They said that it was necessary to imply a contractual term that precluded Tesco from terminating employees to deny them this contractual benefit. The injunction was maintained.
This is an important decision as it confirms that employers do not have carte blanche to remove permanent benefits, especially by using fire and rehire practices. The new Employment Bill seeks to address to what extent such rights will become statutory. This was a resounding victory for employee rights.
The Supreme Court decision can be found here.
This blog was written by Anita Vadgama, Partner at didlaw.
