The Court of Appeal has overturned an injunction that had prevented Tesco from using fire-and-rehire to withdraw a collectively agreed contractual benefit that it had previously described as "permanent" and "guaranteed for life" in USDAW and others v Tesco Stores Ltd.
Tesco had undertaken a reorganisation of its distribution centres and, as it did not want to lose all of its existing distribution staff to redundancy, it wanted to provide an incentive for staff to relocate. It negotiated with USDAW and agreed to pay an enhancement known as "Retained Pay". Tesco made it clear that this benefit would remain available for as long as the staff 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. Retained Pay was described as "guaranteed for life", and in the collective agreement (entered into in 2010) it was stated to be a "permanent feature" of an individual's contractual entitlement which could only be changed through mutual consent or promotion to a new role.
In January 2021, Tesco announced its intention to remove Retained Pay, offering employees a lump sum payment of 18 months' Retained Pay in advance, in return for giving up any future entitlement, failing which the employees would be dismissed and offered new terms excluding Retained Pay. USDAW sought an injunction preventing Tesco from terminating the affected contracts and the High Court granted it. It held that the contracts of employment were subject to an implied term that Tesco would not exercise its right to terminate on notice for the purpose of removing or diminishing the right to Retained Pay.
The Court of Appeal held that, even taking into account the pre-contractual statements such as "guaranteed for life", it could not accept that it was the mutual intention of the parties that the contracts would continue for life, or until retirement. It concluded that the contractual wording should be given its ordinary meaning, namely that Tesco would have the right to give notice in the ordinary way, and that the entitlement to Retained Pay would only last as long as the particular contract endured.
The Court of Appeal confirmed that, even in circumstances such as that of the Retained Pay deal which had been described as "guaranteed for life", the test of necessity for implying a term was not met. Even if it was then the appropriate remedy lay in an action for damages and not an injunction.
Take note: The decision in this case shows that it's highly unlikely that fire-and-rehire tactics will result in the granting of an injunction (especially given that the terms the union sought to protect in this instance were described as "guaranteed for life"). Whilst on the topic though, it's worth bearing in mind that the government is imminently due to publish a statutory code on fire and rehire for consultation.
