Tesco has lost its legal battle with Usdaw over fire and rehire

The Supreme Court ruled that Tesco was not entitled to terminate employee contracts and offer to rehire them on less favourable terms, a practice referred to as ‘fire and rehire’.

This comes after shopworker’s union Usdaw took legal action against the UK’s largest supermarket after it terminated contracts of warehouse workers who were entitled to higher pay and offered to rehire them under less favourable contracts.

The Supreme Court ruled that Tesco was not permitted to use ‘fire and rehire’ in these circumstances and restored an injunction preventing the retailer from doing so.

This brings an end to the long-running legal fight between the two parties. In 2022, Usdaw won an injunction that stopped Tesco from dismissing the warehouse workers and offering them new contracts with less favourable terms.

However, Tesco was successful in overturning the injunction on appeal. 

The judgment backed by Lord Reed, Lord Leggatt and Lord Lloyd-Jones, Lord Burrows and Lady Simler said: “Objectively, it is inconceivable that the mutual intention of the parties was that Tesco would retain a unilateral right to terminate the contracts of employees in order to bring retained pay to an end whenever it suited Tesco’s business purposes to do so.

“This would have been viewed, objectively, as unrealistic and as flouting industrial common sense by both sides. 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Tesco to negotiate a longstop date for the entitlement to retained pay or to make clear that the retained pay could be withdrawn if an employee were dismissed with notice and then re-employed in the same role.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.”

A spokesperson for Tesco said: “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.”