‘Fire and Rehire’ injunction overturned

The Court of Appeal has overturned a recent decision of the High Court, which had granted an injunction to prevent Tesco from ‘firing and rehiring’ a group of employees in order to remove a contractual entitlement to enhanced pay.

USDAW and others v Tesco Stores Ltd [2022] EWCA Civ 978

Facts

Staff employed at certain Tesco distribution centres were entitled to receive contractual ‘retained pay’, which had been agreed with the recognised trade union, USDAW, as an incentive for staff to relocate. It was presented to the staff as a permanent entitlement that would remain as long as they were employed in their current role and could not be renegotiated. In January 2021, Tesco announced its intention to remove the entitlement to retained pay, offering a lump sum payment to employees in return. As an alternative, it proposed to dismiss the employees and re-engage them on new terms that would exclude the retained pay entitlement.

USDAW applied to the High Court for a declaration that an implied term of the employees’ contracts prevented Tesco from exercising its right to terminate and re-engage for the purpose of removing the right to retained pay. It sought, and was granted, an injunction preventing Tesco from terminating the affected contracts (see our previous briefing).

Tesco appealed the High Court’s decision to the Court of Appeal.

Court of Appeal decision

The Court has allowed Tesco’s appeal. The High Court had been wrong to find that it was the mutual intention of Tesco and USDAW for the contracts to continue for life, or until normal retirement age, or until the closure of the site concerned. It was also not the intention that the circumstances in which Tesco could bring the contracts to an end should be limited. There was a lack of clarity in USDAW’s case as to what they argued was meant by ‘permanent’, and the implied term they were seeking to rely on (to prevent the termination of the contracts) was insufficiently clear.

The Court of Appeal further decided that an injunction was not justified in this case, even if the High Court’s interpretation of the relevant terms was correct. An injunction cannot be granted unless it is clear beyond argument what the defendant can or cannot do, and this was not the case here.

Consequences of this decision

This decision will come as a relief to employers, particularly those who might be contemplating the option of terminating and re-engaging staff in order to achieve a controversial change to terms and conditions.

The Court of Appeal noted in its decision that it was unaware of any previous case in which a final injunction has been granted to prevent a private sector employer from dismissing an employee for an indefinite period. To grant an injunction in these circumstances, preventing an employer from exercising its contractual right to give notice to terminate an employee’s contract, would have had the potential to create significant problems for employers in practice.