Tesco will be allowed to remove a historical pay incentive and dismiss distribution centre workers who do not agree to new terms and conditions of employment, the Court of Appeal has ruled today in a decision that overturns a previous ban on what a union described as ‘fire and rehire’ practices.
The ruling reverses a previous High Court judgment that prevented the retailer from dismissing a number of staff at its distribution centres in Daventry and Litchfield and seeking to re-engage them on less favourable contracts.
The Union of Shop, Distributive and Allied Workers (Usdaw), which brought a claim on behalf of 42 of its members employed at the Tesco warehouses, said workers were told to give up their entitlement to retained pay – something they argued had been had been permanent and “guaranteed for life”.
The retained pay had been awarded as part of a restructuring exercise in 2007 as an incentive for employees previously based at another warehouse to relocate to either of the two sites.
However, in the Court of Appeal judgment handed down today, Lord Justice Bean says there is nothing in the wording of the retained pay provisions that “could prevent the employer from giving notice to terminate the contract in the usual way”.
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“Whether one focuses on the phrase ‘guaranteed for life’ or the word ‘permanent’ I cannot accept that it has been shown that it was the mutual intention of the parties to the collective agreement, or the parties to the individual contracts of employment into which the 2010 Retained Pay clauses were incorporated, that the contracts would continue for life, or until normal retirement age, or until the closure of the site concerned. Nor can I accept that it was the mutual intention of the parties to limit the circumstances in which Tesco could bring the contracts to an end,” the judgment says.
“Furthermore, it does not seem to me to make any sense to say that if, having given notice of termination, the company makes no offer of a new job it has no liability for breach of contract; if it then offers the employee a new job in a different role there is no continuing entitlement to Retained Pay; but that if it makes an offer to re-engage the employee in the same role as before it can only be on the original terms.”
Usdaw said it would take its case against Tesco to the Supreme Court.
National officer Joanne McGuinness said: “It has always been clear to us what we agreed with Tesco in respect of our members in receipt of retained pay. That is that they would have a right to this payment for as long as they remained employed by Tesco in their current role.
“We were therefore shocked when Tesco adopted fire and rehire tactics to try and strip this right away and this is why we sought an injunction from the High Court. Today’s ruling overturning that injunction will not deter us. It is simply not right that very clear commitments to loyal workers can be simply set aside on a whim as it is no longer convenient for the company to have to continue to make the payments concerned.”
Neil Todd, a trade union specialist at Thompsons Solicitors, which represented Usdaw, said: “We do not agree there was anything unclear about what ‘permanent’ meant in this context. It is difficult to imagine the contemporaneous documentation could have been any clearer that the intention of both Tesco and the workers at the time the agreement was reached was that the right to retained pay could not be unilaterally removed.
“The judgment is a significant set-back, but we will seek leave to appeal and will do all that we can to continue to fight for justice on behalf of all of those affected. This is not the end of the road for the workers concerned.”
A Tesco spokesperson said: “A very small number of colleagues in our UK distribution network receive a supplement to their pay, which was offered a number of years ago as an incentive to retain colleagues. The vast majority of our distribution colleagues today do not receive this top-up, and so we took the decision to phase it out.
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“We are considering our next steps following today’s ruling, and will continue to work constructively with the small number of colleagues affected to agree a way forward.”
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