A Court of Appeal judgment, which took place on Friday 29 July, has reversed a High Court decision on cost-saving measures enacted by Tesco, known as ‘fire and rehire’. In February 2022, Usdaw, the Union of Shop Distributive and Allied Workers, won a landmark legal case against Tesco after a number of the supermarket’s staff were dismissed and then rehired on inferior terms and conditions. Thompsons Solicitors represented the union.

The workers were informed that if they did not give up their entitlement to a considerable proportion of their wages, known as ‘retained pay’, they would be dismissed and then re-engaged on less favourable terms in any event as part of a deliberate cost-saving strategy by the supermarket.

The High Court had originally found that, as the parties had agreed this payment was “permanent” and “guaranteed for life”, the employer was not entitled to serve notice on the contract when its sole purpose for doing so was to remove the benefit in question.

However, the Court of Appeal determined that it was unable to accept that the phrases “permanent” and “guaranteed for life” showed a mutual intention on behalf of both parties that the right to Retained Pay would continue as long as the employee in question performed the role in which they were currently employed to undertake. This was despite the very clear wording in joint statements issued by Tesco and Usdaw at the time.

In the Court’s view there was a lack of clarity as to what both parties meant by “permanent”. In light of this finding the Court also concluded it could not imply a term into the contract to prevent the employer serving notice, even in circumstances where it was doing so solely in order to remove the Right to Retained Pay.

Joanne McGuinness, Usdaw National Officer, said:

“It has always been clear to us what we agreed with Tesco in respect of our members in receipt of Retained Pay. That is that they would have a right to this payment for as long as they remained employed by Tesco in their current role. The agreement was reached at a time when the organisation needed these individuals to remain in post as it could not have been operationally effective if they had chosen to leave. The workers agreed to remain in the business and relocate on the basis of the guarantee of these payments when they otherwise may have taken redundancy.

"We were therefore shocked when Tesco adopted fire and rehire tactics to try and strip this right away and this is why we sought an injunction from the High Court. Today’s ruling overturning that injunction will not deter us. It is simply not right that very clear commitments to loyal workers can be simply set aside on a whim as it is no longer convenient for the company to have to continue to make the payments concerned. We have instructed our solicitors to prepare grounds of appeal to the Supreme Court and we will exhaust every avenue to protect our members’ terms and conditions of employment. “

Retained pay is a substantial sum of money paid to an employee, ranging from 10% to 20% of the employee’s basic pay. It is a one-time payment awarded on top of the worker’s regular base salary.