So we're going to have a look at a couple of cases now. So the first one is USDAW v Tesco Stores. So this is an important and interesting one if you're thinking of fire and re-hire in your organisation.

Now, just to let you know, Donal, who is our regular listener, emailed me with a suggestion for when we're chatting about case law. So Donal suggested we put the full citation up for you guys. So there is a slide with the full citation there. It should appear shortly, hopefully.

Also, if you want to have a look over where you see your question box, there is also a little hand-out box. And if you click on that, you'll be able to click through, and it'll be the link that should get to the Legal-Island case review that was done by Jason Elliott on both cases, and also the full case as well.

Hopefully, that's helpful. It shows we do listen, so please do get in touch if you've got any other suggestions.

So, Seamus, what happened in this case against Tesco?

Seamus: Well, a little bit of background on the case. I'm not going to go into too much detail because those materials are available, and people can read those. But essentially, period of 2007 to 2009, Tesco agreed to pay staff what was known as retained pay.

They were carrying out a reorganisation and a relocation of staff working in their distribution centres. And in order to avoid losing staff, this was the incentive that they offered, was this retained pay and conditions of employment that Tesco brought in at the time. So it was a change that happened. It wasn't just a one-off payment. It was a payment that was being made and the contract of employment had been amended.

Then we get to 2021, and Tesco seemed then to remove the retained pay that they had offered at the time. So it had served its purpose, so to speak, and Tesco then were looking to withdraw this additional payment that staff were getting, this retained pay.

And what they did was they put out through consultation, they said, "You have a choice. You can either take a lump sum of 18 months' retained pay, or alternatively we can fire and re-hire you on new terms and conditions".

So it did feel like a little bit of the usual position of somebody holding a gun to somebody else's head. "In the one hand, you can get a payment equivalent to the 18 months, or alternatively if you don't work with us, then we'll pull the trigger and we'll go down the road of fire and re-hire".

So, in response to that, then you had USDAW, which is the trade union, that made an application to the High Court. And this is an English case. They made an application to the High Court. And what they said was that they sought a declaration that affected employees' contracts were subject to an implied term preventing Tesco from exercising the right to terminate for the purposes of removing the right to retained pay.

So this was just a section of the contract that they wanted to take out. And that's important. It wasn't a whole entire revision of the contract. It was a section that they were looking to amend.

So they wanted the court to confirm that this wasn't something that Tesco could do. And in addition to that, they wanted an injunction preventing Tesco from terminating the contracts of employment. So they were saying, "Number one, we want a declaration that you can't terminate on the basis of this clause. It's in the contract that that's unfair. And two, we want an injunction which prevents Tesco from doing it".

And ultimately, the High Court then found in favour of USDAW and granted relief on both points. And what the court said was that there was an implied term that Tesco staff could not be fired and then re-hired to remove the retained pay element that they were receiving. They said that this was because the retained pay had been promised in language that clearly expressed its permanency.

So, at the time when Tesco were looking to give the carrot, looking for employees to agree in relation to the restructure and the relocation of their distribution centres, they did provide this retained pay. But they had done so on the basis that this was permanently amended in the contract of employment. It wasn't something that was just a temporary basis.

And USDAW were then coming back and saying, "Well, look, you gave it on a permanent basis. This is unfair for you now to seek to withdraw it. The employees have had the benefit of it for over 10 years". And what they were saying was specifically, "It's unfair for you to use the fire and re-hire ability to do that".

Ultimately, the court agreed. And what the court did was they granted the injunction that USDAW had requested, and that's because they said that damages wouldn't have been a sufficient remedy.

So you're faced with this idea that through the consultation process, Tesco will say, "Look, the package here is . . . the compromise is that we'll give you 18 months' equivalent to your retained pay, but in exchange for that, it's written out of your contract". And essentially, the employees felt that that was unfair.

So it's an important decision because there is the ability in law for the employer to fire and re-hire. And this is setting the position out where the court is saying, "Not in all circumstances is that necessarily fair".

Christine: Yeah. You can't have your cake and eat it. They were wanting to use it to their advantage when it was suitable for them. And obviously, a lot of employees stuck around because it was such a great contractual clause, kept the loyalty, which was what they wanted. And then they thought, "Hold on a second. The economy is not doing quite as well as we thought. How can we cut some costs?" And that looked like the easy target.

But it's interesting that the court implied a term in there, and I suppose the strength of bargaining position would have been taking into account it's someone's livelihood, whereas Tesco is a big corporation. They don't want bully-boy tactics, I suppose.

Seamus: Yeah. And when you think about the aspect of the retained payment, as it's called, and then when we think about all of the ways that there has been such an extension to what's considered our normal pay when we come to holidays and those sorts of things, you're right, it is somebody's livelihood. There's a clear dependency.

The reality was that the retained payment had been made. There was an expectation for those members of staff that that was something that they were going to continue with, that it wasn't something that was temporary in nature. There was a permanency built into it.

It's interesting, and specifically whenever you look at, Christine, the Labour Relations Agency's Code of Practice that they have, there is a Code of Practice on agreeing and changing contracts of employment.

Now, that's just recently been updated in May 2020. And there's a section in that that talks about the failure to reach agreement, and what can be done about that. It does say that if an employer has been unable to reach agreement with employees on a proposed change to a contract, they may decide to either drop the matter or to dismiss and re-engage employees on the new contract of employment.

Now, it's not straightforward. It's not just a matter of doing that. There are various things that have to happen, particularly in and around the idea of consultation and collective redundancy consultation processes kicking in then as well.

And then the use of the statutory disciplinary and dismissal procedure, in what circumstances do you have to use that if you're going through a fire and re-hire process and where you don't, because there is an exemption in some cases where you don't have to.

But ultimately, I think if we're looking at takeaway points in relation to this, and going back to our poll figure, which was significantly saying that there was no intention to fire and re-hire, it should always be a last resort. You should have exhausted all of the prior options before you pull the trigger in relation to fire and re-hire.

And in addition to that, it's essential that there is a robust commercial reason for why the change is required. Some of the commentary in and around that will also say that that robust commercial reason needs to be transparently communicated to the affected staff. So they need to have an understanding as to why there is a need to remove a term.

And certainly communication has to be key. Where you are working in an organisation that is unionised or that there's trade union involved, you're making sure that there's that collective consultation about it.

But essentially, usually, and certainly what the LRA Code of Practice will say, is that you're looking for some form of compromise happening between the parties whenever you're looking at amendment to terms and conditions.

But look, we have a strong indication from the courts here that it's just not going to be as straightforward maybe as what it was perceived previously, that you can just issue a dismissal notice and follow it up straight away by an offer of a new contract on less favourable terms.

Christine: Yeah. Brilliant. Just for everyone, Rolanda has dropped that LRA guide into the chat there if anyone wants to have a wee look at it.

Got an interesting question.

 "Even if it wasn't written in as a permanent term, given that the payment had been made for such a long period of time, would custom and practice kind of kick in?"

I would say yeah.

Seamus: I would agree. Yeah.