Fire and re-hire: Latest news from the Tesco case

In February, we provided an update on the High Court case of USDAW and ors v Tesco Stores Ltd.  You can view our commentary here.

As a brief reminder between 2007 and 2009, after negotiation with USDAW, Tesco gave certain employees a contractual entitlement to “Retained Pay” which was described as “permanent”.  The Retained Pay was to last as long as the employee remained in the same role and could not be negotiated away.

Tesco then attempted to dismiss and re-engage (known as ‘fire and re-hire’) some employees to remove their entitlement to the Retained Pay.  Earlier this year, the High Court granted an injunction which stopped Tesco from carrying out the fire and re-hire.  Tesco appealed to the Court of Appeal.

Court of Appeal decision

The Court of Appeal again considered the meaning of the word “permanent” and found that this, along with the phrase “guaranteed for life”, was not sufficient to show a mutual intention between the parties.  Those phrases didn’t mean that the Retained Pay element of the employment contracts would be either for life, or until retirement age, or until the closure of any particular place.

Tesco therefore still had the right to terminate employee’s contracts in the normal way, subject to the normal rules of unfair and wrongful dismissal.  If the contract was terminated, the entitlement to Retained Pay would also be removed, and Tesco could choose to offer re-engagement on whatever terms they wanted.

The Court went on to stress that that remedy for a wrongful dismissal (i.e. dismissal in breach of contract) claim was ‘almost invariably’ financial compensation, and they could not see any reason in this case why an injunction was necessary.

What does this mean for fire and re-hire?

This decision is good news for employers as it signposts a return to the ‘norm’ in relation to fire and re-hire practises.

However, employers should still take advice at an early stage if they are thinking about utilising fire and re-hire, to reduce the risk as much as possible.  Whilst this case is helpful for employers, we know that the landscape for fire and re-hire hasn’t finished changing yet.

We recently published an update here detailing what we currently know about the new statutory code of practice relating to fire and re-hire.  Employers should keep a keen eye out for the publication of the code, and we’ll of course update you too.