UK retailer Tesco loses legal battle to ‘fire and re-hire’ staff

Tesco had no right to terminate the contracts of some employees and offer to rehire them on less favorable terms, the UK Supreme Court ruled on Thursday.

Store workers’ union Usdaw has launched legal action against Britain’s biggest retailer after Tesco tried to strip warehouse workers of their right to a pay rise.

Tesco ended their contracts and offered to rehire them – a controversial practice often referred to as “leave and rehire”.

Britain’s ruling Labor Party has said it will outlaw “pull and rehire” tactics, but has yet to set out how it will replace current codes of practice.

A spokesman for the UK’s Department for Business and Trade said: “We will soon introduce legislation to end unscrupulous firing and re-employment practices that have no place in a modern job market.”

The Supreme Court ruled that Tesco was not allowed to use “leave and re-employment” to remove some workers’ increased pay and reinstated an injunction preventing the retailer from doing so.

Tesco, which has a nearly 28% share of the UK grocery market, said it accepted the decision. A spokesman said it concerned “a very small number of colleagues across our UK distribution network who are receiving a top-up to their pay”.

“Our aim in this regard has always been to ensure the fairness of all our distribution center colleagues,” the spokesperson added.

Paddy Lillis, general secretary of Usdaw, said in a statement that the decision was “a victory for the trade union movement as a whole”.

Lillis said of the “fire and rehire” itself: “These kinds of tactics have no place in industrial relations, so we felt we had to act to protect those involved.”

The dispute centered on the right of certain warehouse workers to increased pay for agreeing to move to a new distribution center back in 2007.

When Tesco tried to scrap the right in 2021, it asked workers to agree to scrap it for a lump sum payment or their contract would be terminated and a new contract offered without the pay rise included.

Usdaw initially won an injunction, which prevented Tesco from sacking warehouse workers and offering them new contracts, but Tesco overturned this ruling in 2022.

The union’s lawyer, Oliver Segal, said in court papers for the April appeal that led to Thursday’s decision that Tesco effectively claims it has “unlimited freedom to terminate the relationship ‘at will'”.

However, Tesco claimed that the affected workers had received thousands of pounds worth of increased pay each for more than a decade.

(Reporting by Sam Tobin; Editing by William James, Alison Williams, Alexandra Hudson)