The background – Tesco offers Retained Pay
In 2007, supermarket giant, Tesco re-organised its warehouses nationally, a move that required 100s of employees to relocate.
Rather than making people redundant, Tesco negotiated with USDAW (the recognised trade union) that it would give any staff who stayed on and agreed to be relocated, ‘Retained Pay’. This payment would be paid to them each month and was described in their employment contracts as ‘permanent’.
However, in 2021, Tesco attempted to remove Retained Pay by firing and re-hiring their employees on new terms which excluded Retained Pay. This of course, was not well received.
What happened next? Tesco attempts to remove Retained Pay
- USDAW initially got an injunction from the High Court to stop Tesco. The High Court held that the contracts of employment were subject to an implied term that Tesco couldn’t fire and rehire people just to avoid paying them Retained Pay.
This decision was overturned by the Court of Appeal, who countered that there was no implied term that the deal was permanent. They said that Tesco had the right to give notice in the ordinary way, and the entitlement to Retained Pay ended when the contract ended.
The outcome – Fire and re-hire unacceptable if the purpose is to remove Retained Pay
- USDAW appealed this decision to the Supreme Court. The Supreme Court re-instated the injunction and overturned the Court of Appeal’s decision. They agreed with the USDAW that Tesco’s right to dismiss could not be used for the purpose of depriving employees of the right to Retained Pay.
The case illustrates that there are exceptional occasions where an employer’s ability to exercise an express term of the contract of employment (here, the right to terminate a contract by giving contractual notice) can be limited by an implied term. Similar examples exist, in one example an employer tried to fire and re-hire an employee so they could avoid paying permanent health insurance benefits (Aspden v Webbs Poultry).
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