Fire and Rehire

The pandemic saw the increase of employers using 'fire-and-rehire' nastiness by giving employees dismissal notices and then offering immediate re-employment on lesser terms and conditions.

In USDAW & others v Tesco Stores Limited [2020] the High Court granted the trade union USDAW an injunction to stop Tesco from 'firing and rehiring' employees so that they could remove a contractual entitlement to enhanced pay, called "retained pay". Retained pay was negotiated by USDAW as a retention incentive in 2010, when Tesco was reorganising its distribution centres and required staff to relocate about 45 miles away.

Retained pay represents between 32% - 39% per cent of the employees' pay. The contract states "retained pay will remain a permanent feature of an individual's contractual eligibility" subject to a few clearly defined exceptions. Tesco assured employees that retained pay would last for as long as the employee remained in the same role, with phrases such as "guaranteed protection for life" repeatedly used.

The Court said that it was appropriate to imply a contractual term preventing Tesco from exercising its contractual right to terminate on notice in order to remove or diminish employee's contractual entitlement to retained pay. In the Court's opinion, without such a term, an individual employee's entitlement to retained pay would not be permanent and the contract would lack practical coherence.

This means that an employer's ability to withdraw a 'permanent' contractual benefit, by simply relying on the ultimate right to terminate the relevant contracts by giving due contractual notice, is prohibited. At the time the clause was negotiated, Tesco could have set a longstop date for the entitlement to retained pay, but they did not. It was their own fault for not future-proofing the agreement.

See What ACAS says about fire and rehire practices