Tesco’s warehouse employees, who opposed the firm’s contentious “dismiss and reengage” strategies, have won their legal battle after the UK Supreme Court annulled a previous judgement. The case was brought by the Union of Shop, Distributive and Allied Workers (Usdaw) on behalf of members who, in 2007, were granted a “life-long” allowance as a part of their package, subject to their agreement to move to a new location. This allowance was then at risk in 2021 as Tesco aimed to terminate and renegotiate their contracts without this benefit.
The Supreme Court decreed on Thursday that implicit contract terms restricted Tesco’s ability to terminate workers’ contracts with the sole purpose of denying them their supplement. The Supplement formed a significant portion of many employees’ total income. Tesco’s management is guided by Ken Murphy, the group’s chief executive officer from Cork.
The Supreme Court also endorsed an initial High Court directive to issue an injunction to prevent Tesco from dismissing and realigning the workforce. The Court pointed out that in this scenario, determining the correct damages would have been unfeasible. This High Court injunction was formerly overruled on appeal.
A representative of Thompsons Solicitors, which acted on behalf of Usdaw, described the verdict as an “outstanding result”, vital in safeguarding a crucial right. Despite this victory, the case highlighted the complexities for workers in seeking to establish their rights legally, emphasizing the need for legislative amendments to deter employers from employing fire and rehire practices.
As part of a comprehensive reform of workers’ rights, the government has pledged to address this approach, which leverages the threat of dismissal to implement modifications to contracts. Paddy Lillis, Usdaw’s secretary-general, commented on the matter, stating that such strategies hold “no place in industrial relations”. He criticized Tesco’s intent to abolish a benefit that had been clearly labelled as “persistent”. He further reiterated Usdaw’s stand by saying, “When we claimed permanent, we literally meant it.”
The Covid-19 pandemic has shed light on the practice of ‘fire and rehire’ used by employers. Many companies during the health crisis justified this move as a necessary measure to reduce labour costs and thus survive, a rationale criticised by unions who saw it as a guise to lower employment conditions. Notably, the government’s pledge to overcome the issues of ‘fire and rehire’ seems set to stir controversy as part of its ‘Plan to Make Work Pay’, with a commitment to draft a related legislation within its initial 100 days.
Trade unions call for a comprehensive prohibition of this practice, but business conglomerates argue that sometimes ‘fire and rehire’ steps are essential as the final option to prevent a company’s collapse. They suggest that, if banned, employers would simply terminate employees without offering re-engagement.
Mr Todd commented that the ruling on Tesco might not have broader implications as it’s rare for contracts to include such a explicit term of permanent benefit, yet it indicates the necessity for stricter laws. “For a thoroughly profitable company, the process of firing its workforce and rehiring them on lesser terms is far too accessible,” he remarked, proposing that courts should hold increased capability to investigate the financial basis behind such decisions made by employers and the extent of financial stress.
In reference to a longstanding dispute involving a small fraction of their colleagues, Tesco expressed its agreement with the court’s judgement. To ensure equal treatment amongst employees, the retail giant made a competitive proposal at the time to offset the loss of supplement for the affected staff, a proposal that was accepted by many. Tesco added, “We have consistently sought to engage positively with Usdaw and those few affected colleagues.”- Copyright The Financial Times Limited 2024.