Supreme Court prevents Tesco from sacking Employees

Supreme Court prevents Tesco from sacking Employees

In a case decided this week, the Supreme Court took the highly unusual step of preventing an employer from terminating the employment of certain employees.

The employer, Tesco, had wanted to “fire and rehire” a group of employees who worked at distribution centres in Daventry and Lichfield in order to reduce their pay. The problem was that back in 2007, as an alternative to redundancies, Tesco had agreed to pay “Retained Pay” in order to incentive employees to move from one distribution centre to another. This pay made up around 32-39% of their wages. The agreement recording the terms applying to Retained Pay said that it was a “permanent feature” of the employees’ contracts.

In 2021, Tesco decided they wanted to remove the Retained Pay and set out consulting with the staff who received it. Those employees who did not agree to this would be dismissed but offered continued employment on the new terms without the Retained Pay, or “fired and rehired”.

The employees, supported by the union USDAW, sought an injunction, or court order, preventing Tesco from sacking them. They argued that permanent meant just that and the Retained Pay could not be removed.

The Supreme Court agreed, saying it is “inconceivable that, in negotiating the Retained Pay term, USDAW and Tesco objectively intended that Tesco should retain the unilateral right to bring Retained Pay to an end by dismissing those employees, whenever it suited Tesco to do so.”

They agreed that an injunction should be granted to prevent Tesco from sacking the employees in order to remove the Retained Pay. However, this doesn’t prevent Tesco from sacking the employees for some other reason, for example, if they are guilty of misconduct or are redundant.

This case highlights the importance of what the parties intend when negotiating terms of employment.

Labour have said they intend to replace the current statutory code on fire and rehire with a strengthened code.

The judgment of the case can be found here https://www.supremecourt.uk/cases/uksc-2022-0133.html.