The claimant, a trade union, is recognised by the defendant for the purposes of collective bargaining. An agreement was reached for retained pay (instead of a lump sum) and the defendant made it clear that the entitlement to retained pay would remain for as long as the employee was employed in their role. In 2010 it was noted as a ‘permanent feature’ of the contractual entitlement which could only be changed through mutual consent, on promotion or a change to work patterns. 

In January 2021, the defendant stated it was removing retained pay with a lump sum being paid for the entitlement to be removed.  If the employees failed to accept that then they would be dismissed and offered new terms. The claimant sought a declaration that the contracts were subject to an implied term stopping the defendant from terminating the contract for the purpose of removing retained pay. At first instance, the High Court granted the relief. The reason for this was that ‘permanent’ as noted in 2010 was such that retained pay would exist as long as the employee was employed in the same substantive role. This did not negate the defendant’s right to terminate the contract where there was just cause, such as misconduct or redundancy.  

The defendant appealed to the Court of Appeal. The appeal was allowed. On the interpretation of ‘permanent’ the Court of Appeal stated the High Court had erred.  There was no evidence that the issue of fire and rehire had been examined in the context of ‘permanent’ as discussed in 2010. Despite the lack of time limit in the contract regarding retained pay, the lack of clarity did not mean that it would exist for life. As a result, the express terms (rather than the implied term used by the High Court) would have to be applied. This meant that the defendant could give notice under the contract and that the retained pay would only exist for as long as the contract existed.    

The Court of Appeal also stated the disposal of the case from the High Court was inappropriate. It was the first situation in which a final injunction had been granted to prevent a private employer from dismissing an employee indefinitely. The injunction itself also suffered from a lack of clarity as the defendant did not know what it could or could not do.  

Practical Lessons

This case has implications for the restriction of fire and rehire. In this case, Tesco were clearly using it as a method of removing the retained pay aspect that had been negotiated some ten years earlier. The Court of Appeal has stated that it was wrong to intervene in this case and that injunctions should not be used to restrict the contractual rights of private employers. It is suggested that this is a sensible position as the point does come in which the contractual rights agreed to by both parties should be those enforced rather than the creation of new implied rights in an uncertain area with uncertain outcomes. 
https://www.bailii.org/ew/cases/EWCA/Civ/2022/978.html 

And to look at the High Court decision case review see here: https://www.legal-island.com/articles/uk/case-law/2022/february/usdaw-v-tesco-stores-ltd-2022/