Tesco was not entitled to terminate some employees' contracts and offer to rehire them on less favourable terms, the United Kingdom's Supreme Court ruled on Thursday (12 September).
Shopworkers' union Usdaw took legal action against Britain's biggest retailer after Tesco sought to remove some warehouse workers' entitlement to increased pay.
Tesco ended their contracts and offered to re-engage them – a controversial practice often referred to as 'fire and rehire'.
Britain's governing Labour Party has said it will outlaw 'fire and rehire' tactics, but has yet to set out how it will replace current codes of practice.
A spokesperson for Britain's Department for Business and Trade said, “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.”
The Supreme Court ruled that Tesco was not permitted to use 'fire and rehire' to remove some workers' increased pay and restored an injunction preventing the retailer from doing so.
Tesco, which has a British grocery market share of nearly 28%, said it accepted the ruling. A spokesperson said it related to “a very small number of colleagues in our UK distribution network who receive a supplement to their pay”.
“Our objective in this has always been to ensure fairness across all our distribution centre colleagues,” the spokesperson added.
AJ Bell analyst Danni Hewson, stated, “Although this dispute only relates to a small number of Tesco staff it will be seen as a big victory for unions. It also sets the stage for further legislation changes by the new government.
“Labour has been clear it believes the practice of fire and rehire, which flared up during the COVID-19 pandemic, has no place in a modern working Britain.”
'A Win For The Trade Union Movement'
Paddy Lillis, Usdaw general secretary, said in a statement that the ruling was a win for the trade union movement as a whole”.
Lillis said of "fire and rehire" itself: "These sorts of tactics have no place in industrial relations, so we felt we had to act to protect those concerned.”
The dispute centred on certain warehouse workers' entitlement to enhanced pay for agreeing to move to a new distribution centre back in 2007.
When Tesco sought to remove the entitlement in 2021, it asked workers to agree to its removal for a lump sum payment or else their contract would be terminated and a new contract offered without the increased pay included.
Usdaw initially won an injunction, which prevented Tesco from dismissing the warehouse workers and offering them new contracts, but Tesco overturned that ruling in 2022.
The union's lawyer, Oliver Segal, said in court documents for the appeal in April that led to Thursday's ruling that Tesco was effectively arguing it has an "unrestricted freedom to terminate the relationship 'at will'.”
Tesco, however, argued the affected workers had received increased pay worth thousands of pounds each for more than a decade.
News by Reuters, additional reporting by ESM.
