This was the final stage of a long-running legal battle in England between Tesco and the Union of Shop, Distribution and Allied Workers (Usdaw), over the supermarket chain’s proposals to fire staff at Daventry and Lichfield distribution centres and rehire them on lower pay in 2021. A similar case involving workers at the Livingston site has been stayed in the Scottish courts.

After the High Court ruled in the retail distribution union’s favour in 2022, Tesco successfully appealed against the decision the same year. The union then took the case to the country’s highest court, with five Supreme Court justices ruling unanimously that Tesco should be blocked from dismissing the staff.

The case arose after Tesco planned to close some of its distribution centres in 2007 and offered staff ‘retained pay’ for them to relocate. In 2021, the chain wished to bring ‘retained pay’ to an end and told staff that the enhancement would be removed in return for a lump sum, or their contracts would be terminated and then reoffered on the same terms, but without the increased salary. Usdaw argued that ‘retained pay’ was described as ‘permanent’ in the staff’s contracts, meaning it could not be removed.

Paddy Lillis, Usdaw general secretary, said: “We are delighted to get this outcome, which is a win for the trade union movement as a whole.”

Neil Todd, a partner at law firm Thompsons Solicitors, which represented Usdaw, said: “This is a fantastic judgement for Usdaw and the members concerned. Those in receipt of retained pay were promised unequivocally that they would be afforded a permanent benefit under their employment contract if they agreed to remain with the business and support it when it needed them most.

“They were then threatened with ‘fire and rehire’ when Tesco considered that the benefit had served its purpose. This decision illustrates that a court will intervene to give effect to the parties’ intentions when entering into a contract. It also demonstrates that a right to an injunction is available regarding a breach of contract of employment when damages are not an adequate remedy, as was the case here.

“The injunction will prevent this important right from being stripped away. The litigation has been hard fought, but we are delighted to achieve an outcome that we consider just in all circumstances.”

Another perspective came from Henry Clinton-Davis, partner and employment law specialist at law firm Arnold & Porter, who said: “There has been a lot of hype about employers seeking to change employees’ terms and conditions through the tactic of ‘fire and rehire’. The facts of this case were a little unique because the pay supplement had been expressly offered for the duration of the employees’ employment. The court felt it would ‘flout common sense’ were the company able to remove the benefit by dismissing the employees and offering them employment on new terms.

“The new Labour government is seeking to ban the practice of fire and rehire, save in very exceptional circumstances. But do we really need the government to go that far? The reality is that ‘fire and rehire’ has almost always been seen as a tactic of last resort, as emphasised by the new ACAS Code of Practice, which itself only came into force on 18 July this year.

“At the end of the day, there are times when perfectly reasonable proposals to change terms are rejected, however much consultation has taken place, and where the fire and rehire alternative may be the only way to implement the proposed changes. The alternative is that employers are stuck with old and outdated terms and practices, the continuation of which will damage the business, and ultimately job prospects for the employees concerned.”

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