The Supreme Court has ruled that Tesco cannot fire and rehire employees on less favourable terms. The decision, made in Tesco Stores v Union of Shop, Distributive and Allied Workers [2024] UKSC 28, blocks Tesco from dismissing staff to reoffer them positions without their enhanced pay. The Court, led by Lord Reed, found that allowing such dismissals would undermine the original contract’s purpose. While this ruling enforces contractual intentions, it does not eliminate the fire-and-rehire practice, which can still be used legally if done fairly.
The case dates back to 2007 when Tesco gave offer of ‘retained pay’ to employees who agreed to relocate to avoid redundancy. They were told this was a permanent change to their terms. In 2021, Tesco sought to remove the retained pay; they offered a one off lump sum as an incentive. If the Tesco staff didn’t agree to the change Tesco told them they would be dismissed and re-engaged on new, lower, pay and, as the new contract didn’t contain the retained pay, they would not be entitled to it. The union said that there was an implied term that the old contract could not be ended to deprive staff of the retained pay. The union acting for the Tesco staff successfully argued that, because Tesco had said in 2007 that the retained pay would be permanent they could not rely on fire and rehire principles to avoid it.
Does this case affect how businesses can rely on the principle fire and rehire going forward? Generally, the first step to changing terms of employment is to consult with employees and seek to agree the desired change. If this does not work, as a last resort, it is possible to bring the current contract to an end and re-engage an employee on new terms. This case does not necessarily change this. What is shows us is that , it is vital to draft a contract in such a way that changes can be made in the future. Tesco didn’t do this so were left with an term implied into their contracts that the retained pay could not be removed using a fire and rehire process.
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