The judgement showed employers should ensure they use clear language when creating employment contracts from union agreements, explained Alex Mizzi, legal director and employment lawyer at law firm Howard Kennedy.
Speaking to HR magazine, she said: “This case doesn't drive a coach and horses through fire and rehire, but it should give employers pause – particularly those with union recognition.
“Collective agreements are often expressed less precisely, or with fewer carve-outs, than employment contracts, because they are not legally binding between the employer and union.
“However, loose language can cause issues for employers when they become incorporated into individual employment contracts, as was the case here.”
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Tesco and Usdaw have been embroiled in a dispute over the retailer’s decision to end a long-term benefit of retained, or enhanced, pay for employees in 2021. The benefit was initially offered to staff who relocated after the retailer closed some of its distribution centres in 2007, in the place of a redundancy payment.
Workers understood the 'retained' pay was a contractual entitlement that was in effect a permanent increase in their pay for the duration of their contract.
However, Tesco then attempted to remove retained pay and instead offered staff a lump sum, or said it would fire and rehire them on the same terms without the increased pay, which the Supreme Court ruled in favour of in February 2022.
In January 2023, however, Usdaw won the right to appeal the case and yesterday succeeded in obtaining an injunction that will prevent the retailer from firing and rehiring the workers on lesser terms.
Paddy Lillis, Usdaw general secretary, described the decision as “a win for the trade union movement as a whole” in a statement.
He commented: “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.”
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The case could leave room for trade unions to threaten injunctions during future negotiations with employers, Mizzi warned.
She continued: “The Supreme Court found that the employees in question had a permanent right to retained pay as long as they remained in the same role, and that if Tesco had been able to terminate their contracts and rehire them without the retained pay, this would have made the contractual term meaningless.
“The case also makes it clear that an injunction can be granted to prevent termination in these circumstances. Although the facts were somewhat unusual, we expect unions to use the threat of an injunction as a negotiating lever in fire and rehire cases.”
Patrick Howarth, partner at Foot Anstey LLP, emphasised the judgement showed the importance of communicating with unions.
“Today’s Supreme Court judgement in Tesco v Usdaw should remind HR professionals of an important lesson,” he told HR magazine.
“Throughout the case, communication between unions, employers and employees during consultation has been determined to be relevant evidence as to what contractual terms actually meant.
“This important ruling should serve as a reminder to us all of the importance of careful drafting in all communication.”
