In the case of USDAW and others v Tesco Stores, the Supreme Court reviewed Tesco’s decision to end certain employment contracts that included a provision for “Retained Pay”, which was described as a ‘permanent’ benefit. Tesco sought to terminate these contracts and offer re-engagement on contracts that did not include Retained Pay, i.e. to fire and re-hire.
The issue originated from a 2007 reorganisation of Tesco’s warehouses, which required significant staff relocations. To avoid redundancies, Tesco negotiated with USDAW and agreed to provide a monthly ‘Retained Pay’ payment to employees who agreed to the relocations. This benefit was described in their contracts as ‘permanent’. However, in 2021, Tesco attempted to eliminate Retained Pay by dismissing employees and re-hiring them on new terms without the benefit.
Initially, USDAW secured an injunction from the High Court to stop Tesco from ending the affected contracts. The High Court ruled that there was an implied term in the employment contracts preventing Tesco from terminating them solely to eliminate Retained Pay.
However, the Court of Appeal overturned this ruling, deciding that no such implied term existed, meaning Tesco could terminate the contracts with proper notice, and the right to Retained Pay would only exist as long as the contracts were in force.
USDAW then appealed to the Supreme Court, which reinstated the injunction, reversing the Court of Appeal’s decision. The Supreme Court held that while Tesco had the right to dismiss employees with the appropriate notice, this right was restricted by an implied term that they could not terminate the contracts specifically to remove the employees’ entitlement to Retained Pay.
Read the full judgment here: https://www.supremecourt.uk/cases/docs/uksc-2022-0133-judgment.pdf