Tesco loses High Court battle over ‘fire and rehire’ plans for retail workers

Tesco has lost a High Court battle against a retail workers union over its “fire and rehire” plans.

The supermarket giant faced legal action from the Union of Shop, Distributive and Allied Workers (Usdaw) after it attempted to sack distribution centre staff and rehire them on lower pay in 2021.

After the High Court ruled in favour of the union in 2022, the supermarket giant successfully appealed the decision later that year.

But the High Court ruled yesterday that Tesco must be prevented from firing its staff.

This comes as Labour plans reforms to workers’ rights that will ban fire-and-rehire policies and zero-hours contracts.

There are fears that the new rules facing businesses, coupled with the prospect of higher taxes, will discourage companies from hiring.

The dispute erupted after Tesco planned to close some distribution centres in 2007, offering employees a higher wage – known as a “retained wage” – to relocate.

In 2021, the grocer attempted to end the “wage withholding” scheme, telling staff it would be scrapped in exchange for a one-off payment or their contracts would be terminated and re-offered on the same terms at a lower wage.

Usdaw argued that the higher salary was described as permanent in the contracts and could not be removed.

Tesco argued it was using a “contractual mechanism” open to employers.

But the High Court ruling said it was “unconscionable” that “Tesco should retain a unilateral right to terminate employees’ contracts to end withheld wages where it suits Tesco’s commercial purposes to do so”.

“That would have been seen, objectively, as unrealistic and a violation of industrial common sense by both sides,” he said.

Paddy Lillis, general secretary of Usdaw, said: “These tactics have no place in industrial relations so we felt we had to act to protect those affected.”

Tesco accepted the ruling, adding: “Today’s judgment concerns a dispute brought on behalf of a very small number of colleagues in our UK distribution network who receive a top-up to their pay.”

The “vast majority” of distribution staff do not receive the supplement, he said.

‘In 2021, we made the decision to phase it out. We made a competitive offer at the time and many of them decided to take it up.

“Our aim has always been to engage constructively with Usdaw and the small number of colleagues affected.”