Court of Appeal cancels fire and rehire injunction

Posted On: [21/07/2022]

Fire and re-hire

Earlier this year the High Court granted USDAW (trade union) an injunction to prevent Tesco from ‘firing and rehiring” employees in order to remove a negotiated entitlement to enhanced pay. In Tesco v USDAW & others, the Court of Appeal has overturned the injunction. The case is about “fire and re-hire”. Employers do this when making changes to terms and conditions of employment. Employees who refuse to agree to proposed new terms are dismissed and re-hired on the new terms.

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The Background

Tesco was planning an expansion and restructuring of its distribution centre network involving the opening of new sites and the closure of others in 2007. It did not want to lose experienced warehouse and persuaded employees to move to other distribution centres by giving them a sweetener called Retained Pay, which increased their wages. In communications to staff, Tesco made clear that the individual entitlement to Retained Pay would remain for as long as they were employed in their current role, that it could not be negotiated away, and that it would increase each year in line with any general pay rise. A 2010 collective agreement stated that Retained Pay would be a ‘permanent feature’ of an individual’s contractual entitlement, and could only be changed through mutual consent, on promotion, or in the case of an employee-requested change to working patterns. In 2021, Tesco wanted to end Retained Pay and gave notice to all staff with Retained Pay that it intended to seek their agreement to remove the Retained Pay clauses from their contracts in return for an advance payment of 18 months Retained Pay. Anyone who did not agree would be fired and re-hired on different terms.

In the High Court

USDAW sued Tesco in the High Court on behalf of its members and won an injunction to prevent the fire and re-hire. The High Court said that there was an implied term preventing any dismissal that simply removed retained pay. The High Court also granted a permanent injunction against dismissal.

In the Court of Appeal

Tesco appealed to the Court of Appeal, which overturned the High Court. The Court of Appeal said that the High Court was wrong to find that USDAW and Tesco intended that the Retained Pay should be permanent in the sense that the contracts would continue for life, or until normal retirement age, or until the closure of the workplace, or that the circumstances in which Tesco could terminate the contracts should be limited. The Court of Appeal also stated that even if the High Court had been correct in its interpretation of the contract, this was not a case in which the grant of an injunction was justified. It was not aware of any case in which a court has granted a final injunction to prevent a private sector employer from dismissing an employee for an indefinite period. The Court said that the remedy for a wrongful dismissal at common law is almost invariably financial. Further, an injunction cannot be granted unless it is clear beyond argument what the defendant can and cannot do: which was not the position here.

Usdaw says that they will appeal the decision to the Supreme Court.

The Government has said that it will publish a statutory code on the practice of ‘fire and rehire’ to clamp down on controversial tactics used by employers who fail to engage in meaningful consultations with employees – New Statutory Code on Fire and re-hire