Tesco, one of the UK’s biggest supermarket chains, has recently lost a major legal battle in the UK Supreme Court over its attempt to “fire and rehire” staff on lower wages. This case, which has been closely followed across the country, started back in 2021 when Tesco tried to cut pay for some of its employees by threatening to dismiss them and then rehire them on new contracts with less money.

What Sparked the Dispute?

The dispute began when Tesco tried to remove a special “retained pay” that it had promised some workers back in 2007. At that time, Tesco was closing several of its distribution centers and wanted its employees to move to other locations. To encourage these workers to relocate, Tesco offered extra payments called “retained pay.” These payments were permanently added to their employment contracts, which meant they were supposed to receive this extra pay as long as they worked for Tesco.

Fast forward to 2021, and Tesco decided it no longer wanted to keep paying this extra money. The company told these workers that if they did not agree to lose the retained pay, they would be fired and then rehired on new contracts that did not include the additional payments. This led to a heated conflict with the shopworkers’ union, Usdaw, who supported the affected staff.

The Supreme Court’s Decision

The case reached the UK Supreme Court, where the judges sided with the workers. The court decided that Tesco could not simply fire employees to avoid paying the retention payments and then rehire them on worse terms. The judges explained that when Tesco offered the retained pay in 2007, it was meant to be a permanent deal to persuade the workers to make significant changes in their lives, such as moving to new locations. It wasn’t intended to be something Tesco could take away whenever it suited them.

Supreme Court Justices, Lord Burrows and Lady Simler, stated: “It is inconceivable that the mutual intention of the parties was that Tesco would retain a unilateral right to terminate the contracts of employees in order to bring retained pay to an end whenever it suited Tesco’s business purposes to do so.”

In simpler terms, the court found that Tesco’s actions were unfair and against the original agreement made with the employees back in 2007.

Why Does This Matter?

This case has captured widespread attention because it raises bigger questions about the practice of “fire and rehire.” Many companies use this method to cut costs by firing employees and then rehiring them on less favorable terms. Critics argue that this practice is exploitative and unfair to workers.

The Labour government in the UK has said that it plans to introduce new laws to protect workers’ rights. They have promised to ban exploitative practices like zero-hour contracts, end “fire and rehire,” and provide basic employment rights from the first day of work. However, the details of these plans have not yet been released.

Tesco’s Reaction to the Ruling

Tesco responded to the Supreme Court’s ruling by stating that the judgment was related to a “contractual dispute” involving a small number of employees in its UK distribution network. The supermarket explained that the retained pay was initially offered many years ago as an incentive to keep certain staff members.

In 2021, Tesco decided to phase out this extra payment. It claims to have made a fair offer to the affected workers, and many of them accepted it. Tesco added that its aim has always been to engage constructively with Usdaw, the union representing the workers, and the small group of employees involved in this dispute.

Usdaw’s Response

The union Usdaw, which supported the workers throughout the legal battle, expressed their satisfaction with the outcome. They stated, “We are delighted to get this outcome, which is a win for the trade union movement as a whole.” This decision is seen as a significant victory for workers’ rights and could influence future cases involving “fire and rehire” practices.

Looking Ahead: What Does This Mean for Workers?

The Department for Business and Trade also weighed in, emphasizing their commitment to updating Britain’s employment protections to suit the modern economy. A spokesperson said, “We will be bringing forward legislation soon to put an end to unscrupulous fire and rehire practices, which have no place in a modern labour market.”

For many workers in the UK, this ruling could be a game-changer. It sends a clear message that companies can’t just change employment terms as they please, especially when those changes were not part of the original agreement. It also shows that the courts are willing to step in and protect workers’ rights when necessary.