In September 2024, the Supreme Court made an important decision restoring an injunction granted by the High Court in 2022 against Tesco’s use of “fire and rehire” practices.
What happened and what is fire and rehire?
In 2007 Tesco relocated a number of its distribution centres and introduced a ‘permanent’ contractual enhanced payment, which they called “retained pay”, for employees at distribution centres which were closing in return for them remaining with Tesco but moving to another distribution centre. The enhancement was an alternative to a lump sum redundancy payment.
In 2021 Tesco sought to remove this entitlement, asking staff to consent to retained pay being removed from their employment contracts in return for a lump sum. Tesco explained the alternative, if employees didn’t consent, was that their contracts of employment would be terminated and they would be offered re-engagement on new terms which didn’t include the retained pay element (i.e they would be fired and re-hired). This approach led to legal action by the Union of Shop Distributive and Allied Workers (the Union) which resulted in an injunction being granted by the High Court in February 2020 to halt Tesco’s plans. This wasn’t the end though as Tesco successfully appealed to the Court of Appeal in June 2022 and then the Union further appealed to the Supreme Court bringing us to the September decision that the injunction stands. The impact of this decision is that Tesco cannot dismiss employees solely to remove retained pay as it is correct to imply a term into the relevant employment contracts preventing Tesco from exercising the contractual right to dismiss the employees on notice for the purpose of removing or diminishing their right to receive permanent retained pay.
Changes to the employment law landscape
This decision reflects a growing focus on addressing what are considered to be ‘undesirable’ employment practices in the UK. In July this year, a new Code of Practice was introduced on dismissal and re-engagement following P&O Ferries’ mass sacking of 800 workers without consultation in 2022. The Code says that the practice should be treated as a “last resort” but that employers may use dismissal and re-engagement if it has “participated in a thorough and open information-sharing and consultation process, as part of which it has genuinely considered any reasonable alternative proposals”. Further, Labour, as part of its election manifesto, pledged to ban the practice of “fire and rehire”. While in reality this was election hype and there will not be an outright ban, Labour will be introducing a new and strengthened Code of Practice, which will undoubtedly make it more difficult for employers to justify detrimental changes to employment contracts.
The Tesco decision is therefore a timely reminder that employers need to ensure transparency when both communication and documenting the terms and conditions which apply to employee benefits.
With the introduction of the Employment Rights Bill, our employment team will be hosting a free webinar on 5 November 2024 to provide you with essential updates and expert insight into the legal changes, including in relation to Labour’s proposed changes to fire and rehire practices. Don’t miss out and book your space here.
Disclaimer
This information is intended for general informational purposes only and does not constitute legal advice. We recommend seeking professional advice before taking any action on the information provided. If you would like to discuss your specific circumstances, please feel free to contact us on 0800 2800 421.
