Injunction granted restraining termination and re-engagement of employees


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The High Court has granted an injunction restraining a supermarket from withdrawing a contractual benefit by means of termination and re-engagement, holding that there was an implied term which prevented termination on notice for the purpose of removing or diminishing the employee's entitlement to that benefit in USDAW and others v Tesco Stores Ltd.

USDAW is recognised by Tesco for collective bargaining and between 2007 and 2009, USDAW and Tesco agreed arrangements for "Retained Pay" which became an individual contractual entitlement. In communicating this to staff Tesco made it clear that the individual entitlement to Retained Pay would remain for as long as the employees were employed in their current role, could not be negotiated away, and would increase each year in line with any general pay rise. In a joint statement published by Tesco and USDAW Retained Pay was described as "guaranteed for life". The term was incorporated into the employment contracts of the claimants, all of whom are warehouse operatives. In January 2021, Tesco formally announced its intention to remove Retained Pay and offered a sum of 18 month's Retained Pay in advance for giving up the entitlement. If the employees refused to do so they would be dismissed and offered new terms excluding Retained Pay. USDAW applied to the High Court for a declaration that affected employees' contracts were subject to an implied term preventing Tesco from exercising its contractual right to terminate for the purpose of removing or diminishing the employees' right to Retained Pay. It also sought an injunction preventing Tesco from terminating the affected contracts.

The High Court granted declaratory relief to the claimants. It concluded that the right to Retained Pay was an express contractual term which had been incorporated into their contracts of employment, and confirmed that this term was subject to an implied term that the right to give notice to terminate the contract cannot be exercised for the purpose of removing or diminishing the employee's right to receive Retained Pay. The Court held that it was just and convenient to make an order restraining Tesco from giving notice to terminate contrary to the implied term.

On a related note, what are the government's intentions when it comes to "fire and rehire", a topic which has generated considerable discussion over recent months? Paul Scully, the Parliamentary Under-Secretary at BEIS, in a written answer in response to a question as to what plans the government has to bring forward legislative proposals on the issue of "fire and rehire", stated that the government has no plans to legislate. Instead he directed employers to the Acas guidance published on 11 November 2021 on "fire and rehire".

Take note: This case is very particular on its facts, and the granting of an injunction to prevent an employer from exercising a contractual power to give notice is very rare. If an employer does go down the route of "fire and rehire" it should consider both the Acas guidance and how to communicate any contractual changes it wishes to make.

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