Tesco loses Supreme Court dismissal and reinstatement case

Tesco says it will accept a Supreme Court ruling in a so-called “fire and rehire” case as part of the government's efforts to strengthen workers' rights.

The Union of Shop Distributive and Allied Workers (Usdaw) and three of its members in Tesco which also represents the union, launched legal action in 2021 against proposals to lay off workers at some distribution centers and rehire them at lower wages.

The case, which originally involved more than 360 workers – the majority of them in Livingston in West Lothian – arose after the supermarket chain offered its employees a higher “continued pay” to relocate in 2007.

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In 2021, Britain's largest retailer announced plans to abolish continued pay, saying those affected would receive a lump sum payment instead.

If the offer is not accepted, the employees' contracts would be terminated and they would then be made a new offer under the same conditions but without a salary increase, the company said.

Usdaw argued that the “withheld” pay was described as “permanent” in employees' contracts and therefore could not be removed, while Tesco said bosses were using a legitimate “contractual mechanism” open to employers.

The Supreme Court ruling followed previous court victories for both parties – most recently for Tesco in the Court of Appeal.

The five judges of the Supreme Court ruled unanimously that Tesco must be prevented from firing its employees.

They stated: “Objectively, it is inconceivable that the mutual intention was for Tesco to reserve the unilateral right to terminate employees' contracts and thus stop the payment of withheld wages whenever it served Tesco's business purposes.”

“This would have been objectively viewed by both sides as unrealistic and contrary to industry common sense.

“Tesco could have negotiated a final date for the entitlement to withholding pay or made it clear that withholding pay could be removed if an employee was dismissed within the notice period and then re-employed in the same role. Neither was done.”

Paddy Lillis, general secretary of Usdaw, said after the ruling: “There is no place for such tactics in industrial relations, so we felt we had to act to protect those affected.”

“We were very disappointed with the outcome of the Court of Appeal, but we always felt that we had to see this case through to the end.

“We are therefore very pleased with this result, which represents a victory for the entire trade union movement.”

The government had previously outlined plans to abolish fire-and-rehire policies and exploitative zero-hours contracts, and to give workers more rights from their first day on the job, including sick pay.

A Tesco spokesman said: “We accept the Supreme Court's ruling. Our colleagues in our distribution centres play a really crucial role in looking after our customers and we value their hard work.”

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“Our aim in doing this has always been to ensure fairness for all our DC colleagues. Today's judgment relates to a contract dispute brought on behalf of a very small number of colleagues in our UK distribution network who receive an allowance on top of their salary.

“This bonus was offered many years ago as an incentive to retain certain colleagues and the vast majority of our sales colleagues do not receive this bonus today.

“In 2021, we made the decision to phase out the program. We made a competitive offer to the affected colleagues at the time and many of them decided to accept it.

“Our aim has always been to work constructively with Usdaw and the small number of colleagues affected.”