‘Fire and Rehire’ Tesco Injunction Overturned

Our article in May 2022 titled “Should you ‘fire and rehire’ in order to change the terms of the employment contract?” discussed the process of fire and rehire and alternatives to it, along with the USDAW v Tesco case. The High Court in USDAW v Tesco had granted the Claimants an injunction to prevent Tesco from firing and rehiring its staff to remove a contractual entitlement to enhanced pay which employees were offered during a reorganisation of its distribution centres. It had been made clear to the employees at the time that the retained pay would remain, but Tesco subsequently sought to remove it. The High Court injunction prevented them from doing so. 

However, the Court of Appeal has now overturned the injunction on the basis that the High Court’s finding that both parties had intended the entitlement to be permanent (meaning in this case for as long as the relevant employee was employed in the same substantive role) was incorrect: it was not the mutual intention that the contracts would continue for life; or until normal retirement age; or until the closure of the site in question; or that the circumstances in which Tesco could bring the contracts to an end should be limited.

What were the findings of the court?

The Court of Appeal found that there was a lack of clarity in USDAW’s case as to what both parties meant as permanent, with phrases such as “guaranteed for life” not being sufficient, and that Tesco would have the right to give notice in the usual way meaning the enhanced pay entitlement would only last as long as the particular contract. This would allow re-engagement on different terms and conditions. 

The Court of Appeal also held that even if the High Court had been correct in its interpretation of the contract, an injunction was not justified.  It also noted that it was not aware of any other case in which a court had granted such an injunction preventing a private sector employer from dismissing an employee for an indefinite period, and that the remedy for wrongful dismissal is in any event almost always financial. 

In summary

Whilst the Court of Appeal decision represents more familiar ground for employers, as always this case is fact specific and the process of ‘fire and rehire’ is not without risk, as discussed in our previous article. Claims for unfair dismissal are a risk, but also other claims including breach of contract and for a protective award for the failure to inform and consult. 

A key take-away from this case is that employers should strengthen their position from the outset with clear, carefully drafted contracts, and that any changes should be well-thought through so that future eventualities are catered for. How those changes are communicated is also something that should be considered. We can advise and assist on all of these aspects. 

This decision is not necessarily the end of the matter, as it is understood that USDW intend to seek permission to appeal to the Supreme Court.

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