Fire and rehire

The practice of fire and rehire remains a controversial one. A recent injunction against Tesco highlights the approach courts are sometimes willing to take to protect workers’ terms and conditions. In our November 2021 CEFMinform update, we advised that an attempt to introduce new legislation to boost worker protections in this area was thwarted, with the government instead opting for better guidance to be issued to employers on the steps they need to take in a fire and rehire situation.

In December 2021, Acas produced updated guidance on employer responsibilities when making changes to employment contracts. This can be found here.

Despite the government not seeking to legislate on the practice currently, the courts can still find the practice unfair and unlawful based on the particular facts of a case and the current legislation. The following case highlights this.

USDAW & others v Tesco Stores Limited

USDAW (the union of shop, distributive and allied workers) is recognised by Tesco for collective bargaining purposes. Several years ago Tesco undertook an expansion programme of its distribution centres and, to ensure they did not lose experienced operatives to redundancy, they offered a guaranteed and ongoing pay protection as an incentive for staff to relocate to the new Tesco distribution centres. This was because they could not be compelled to relocate.

Part of the collective agreement

This benefit was known as ‘retained pay’ and formed part of the collective agreement negotiated with USDAW. It was therefore incorporated into the employees’ terms and conditions. Any new employees at the distribution centres received different and less advantageous terms.

Guaranteed for life

For the staff that agreed the variations to their contract, the pay protection was said to be ‘guaranteed for life’ and represented the difference in pay between their existing pay terms and that of the new pay terms for any new staff at the distribution centres.

Remove retained pay

In January 2021, Tesco announced its intention to remove retained pay. Its rationale for removing it was said to be that the benefit only affected a small cohort of staff now, that the purpose for which retained pay had been given had been achieved and that it wanted to simplify payroll and payroll systems.

Tesco was seeking agreement to the variation and incentivised acceptance of the change by offering 18 months of the enhanced payment as a one-off lump sum payment. If the employees with retained pay refused to accept the changes voluntarily, Tesco was seeking to fire and rehire to remove the benefit.

The claimants in this case opposed the changes, because the benefit was supposed to be guaranteed for life and was therefore incapable of any unilateral or forced change.

Decision

The claimants sought a declaration as to the permanence of their retained pay benefit so that it could not be varied in circumstances where the employees remained in the substantive post for which they had been employed. Further, they sought an injunction from the court preventing Tesco from serving notice upon them in circumstances where Tesco would try to remove the benefit using fire and rehire tactics.

The claimants succeeded with their claims.

Summary

Fire and rehire practices remain a controversial area of law. In this case, it appears the courts were willing to rule in favour of the claimants because the language of the agreements conveyed a permanent benefit.

HR advice is recommended when seeking to change terms and conditions.

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