Fire and rehire in the news

Fire and rehire in the news

In February we reported on the High Court injunction granted in favour of USDAW to prevent Tesco ‘firing and rehiring’ employees. The aim of Tesco’s exercise was to remove a particular benefit (Retained Pay) that had been granted to retain employees in a previous restructuring. That decision of the High Court has just been unanimously and emphatically overturned by the Court of Appeal.

You will recall that in this case, Tesco was prevented by way of an injunction from terminating employment contracts and offering re-employment on different terms. Those different terms included the removal of Retained Pay.

Certain employees of Tesco had a ‘permanent’ right to Retained Pay which was incorporated into employees’ terms and conditions of employment. The Retained Pay had been offered by Tesco some years before so as to retain and incentivise staff who were being re-located.

The Retained Pay was stated to be ‘permanent’ and only capable of being withdrawn in certain limited circumstances such as on promotion or by mutual consent.

In 2021 Tesco sought to remove the entitlement to Retained Pay by offering (i) to buy out the right, or alternatively (ii) to dismiss those employees who did not accept this and offer them re-employment on new terms, that is without any Retained Pay. The union, USDAW, sued but specifically did not pursue an injunction.

However, the High Court granted an injunction of its own volition to restrain Tesco from dismissing and then rehiring in these circumstances. Dismissing for a good cause such as misconduct or redundancy was still permissible according to the High Court.

Tesco appealed and, in what is welcome news for employers, the Court of Appeal has ruled that the employer has an unfettered right to give notice of termination of contract in line with the contractual notice provisions. The High Court had implied a term to give effect to the permanent nature of the Retained Pay, but the Court of Appeal held that this was fundamentally at odds with the right of an employer to give notice to terminate, whatever the reason.

This case, according to the Court of Appeal, was not analogous to the Aspden case in relation to the implication of a term into contracts not to terminate the contract of an incapacitated employee where that would prevent the incapacitated employee from receiving PHI benefits. The fact that an employee would no longer be entitled to Retained Pay (albeit that it was stated to be a ‘permanent’ right) was neither here nor there: nothing could prevent an employer from exercising its right to give notice.

Accordingly, there were no grounds for granting an injunction in this case, and an employee’s remedy would lie in claims for unfair and wrongful dismissal.

So, there is a return to the status quo and this case gives strong backing to employers who wish to fire and re-hire. The likelihood of Government legislation in relation to this looks remote. Employers who wish to go down this route (which ought very much to be a last resort) would be well advised thought to consider the Acas Code before doing so.