Union chiefs have hailed a UK Supreme Court ruling over so-called “fire and rehire” proposals as an “important victory” for workers across the country, claiming the practice has “no place in a modern economy”.
The Union of Shop Distributive and Allied Workers (Usdaw) took legal action against Tesco over the supermarket’s plans to fire staff at some distribution centres and rehire them on less favourable terms in 2021.
Five Supreme Court justices ruled unanimously on Thursday that Tesco should be blocked from dismissing the staff, with Paddy Lillis, Usdaw’s general secretary, saying he was “delighted” with the decision.
Following the judgment, the UK Government said it would be bringing forward legislation to end “unscrupulous fire and rehire practices”, which it claimed had “no place in a modern labour market”.
The case arose after Tesco planned to close some of its distribution centres in 2007, and offered staff increased “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.
Mr Lillis said: “Usdaw has been determined to stand by its members in receipt of this valuable benefit that constituted a key component of their pay.
“We recognised that they had been afforded this payment because of their willingness to serve the business, and it was on that basis that we agreed with Tesco that it should be a permanent right.
“When we said permanent, we meant just that. We were therefore appalled when Tesco threatened these individuals with fire and rehire to remove this benefit.
“These sorts of tactics have no place in industrial relations, so we felt we had to act to protect those concerned.”
Usdaw took legal action alongside three employees, who are also union representatives, who work at distribution centres in Daventry, Northamptonshire, and Lichfield, Staffordshire, arguing that “retained” pay was described as “permanent” in the contracts and could not be removed.
Tesco argued that bosses were using a “contractual mechanism” open to employers.
But in a judgment backed by Lords Reed, Leggatt and Lloyd-Jones, Lord Burrows and Lady Simler said that the use of the word “permanent” in the contracts “conveys that the right to retained pay is not time-limited in any way”.
They added that while Tesco could “dismiss for any other unrelated reason”, the terms meant it could not terminate a contract “for the purpose of removing or diminishing the right of that employee to receive retained pay”.
They said: “It would have been open to Tesco to negotiate a longstop date for the entitlement to retained pay or to make clear that the retained pay could be withdrawn if an employee were dismissed with notice and then re-employed in the same role. Neither was done.”
TUC general secretary Paul Nowak said: “This is an important victory for Usdaw, and for workers across the country.
“Victorian-style employment practices like fire and rehire have no place in a modern economy.
“No company should force staff to reapply for their jobs on worse pay and conditions just to boost profits.
“This case is an urgent reminder of why we need the Government’s Employment Rights Bill to be delivered in full.
“It’s time to end the Tories’ race to the bottom on workplace protections and to drive up labour market standards in Britain.”
A Tesco spokesperson said: “We accept the Supreme Court’s judgment. Our colleagues in our distribution centres play a really critical role in helping us to serve our customers and we value all their hard work.
“Our objective in this has always been to ensure fairness across all our DC colleagues. Today’s judgment relates to a contractual dispute brought on behalf of a very small number of colleagues in our UK distribution network who receive a supplement to their pay.
“This supplement was offered many years ago as an incentive to retain certain colleagues and the vast majority of our distribution colleagues today do not receive this top-up.
“In 2021, we took the decision to phase it out. We made a competitive offer to affected colleagues at that time and many of them chose to accept this.
“Our aim has always been to engage constructively with Usdaw and the small number of colleagues affected.”
A spokesperson for the Department for Business and Trade said: “We are committed to updating Britain’s employment protections so they are fit for our modern economy and the future of work.
“We will be bringing forward legislation soon to put an end to unscrupulous fire and rehire practices, which have no place in a modern labour market.”
