The Supreme Court has ruled that Tesco cannot fire and rehire its distribution workers on less favourable terms, bringing to an end a long-running battle between the supermarket giant and trade union USDAW.
The union took legal action over Tesco’s 2021 proposals to stop the retained pay it gave staff to incentivise them to relocate when its Crick distribution centre closed in 2007.
It announced that the enhancement would be removed in return for a lump sum, or their contracts would be terminated and then reoffered on the same terms, but without the increased salary.
USDAW argued that retained pay was described as permanent in the employees’ contracts, meaning it could not be removed.
However, Tesco said the contracts simply meant the retained pay entitlement was permanent for the duration of the contract and that it was subject to the supermarket’s right to dismiss on notice.
But the Supreme Court judges unanimously ruled that the right to the retained pay was deprived of value if there was nothing stopping it from firing staff to defeat it.
Lord Reed said: “The circumstances in which the right to retained pay was agreed make it clear that it was intended as an inducement to experienced employees to relocate rather than accepting redundancy and receiving the redundancy payments to which they were otherwise entitled.
“That intention would be completely undermined if the contract permitted Tesco to dismiss the employees whenever it pleased in order to avoid paying retained pay.
“No reasonable person in the position of Tesco or the relevant employees could have intended the contract to have that effect.”
Paddy Lillis, USDAW general secretary, said: “USDAW has been determined to stand by its members in receipt of this valuable benefit that constituted a key component of their pay.
“We recognised that they had been afforded this payment because of their willingness to serve the business and it was on that basis that we agreed with Tesco that it should be a permanent right.
“When we said permanent, we meant just that. We were therefore appalled when Tesco threatened these individuals with fire and rehire to remove this benefit. These sorts of tactics have no place in industrial relations, so we felt we had to act to protect those concerned.”
Neil Todd, a partner at law firm Thompsons Solicitors, which represented USDAW, described the judgment as “fantastic”.
He said: “Those in receipt of retained pay were promised unequivocally that they would be afforded a permanent benefit under their employment contract if they agreed to remain with the business and support it when it needed them most.
“They were then threatened with fire and rehire when Tesco considered that the benefit had served its purpose.
“This decision illustrates that a court will intervene to give effect to the parties’ intentions when entering into a contract.”
A Tesco spokesperson said it accepted the judgment: “Our colleagues in our distribution centres play a really critical role in helping us to serve our customers and we value all their hard work,” he said.
“Our objective in this has always been to ensure fairness across all our DC colleagues. Today’s judgment relates to a contractual dispute brought on behalf of a very small number of colleagues in our UK distribution network who receive a supplement to their pay.
“This supplement was offered many years ago as an incentive to retain certain colleagues and the vast majority of our distribution colleagues today do not receive this top up.
“In 2021, we took the decision to phase it out. We made a competitive offer to affected colleagues at that time, and many of them chose to accept this.
“Our aim has always been to engage constructively with USDAW and the small number of colleagues affected,” the spokesman added.
