Tesco issues statement after losing legal battle and 'accepts ruling'

Tesco has broken its silence after losing a legal battle over plans to "fire and rehire" staff on lower pay. The dispute centred on use of threat of dismissal to remove ‘retained pay’ awarded in 2007 to encourage staff to relocate to keep their jobs.

Shopworkers’ union Usdaw raised the legal wrangle in 2021 as it sought to protect some workers at distribution centres. Now, a court has ruled Tesco cannot terminate the employment contracts of staff to stop them receiving the retention payments and then rehire them on new contracts without the top-up.

The legal argument centres around “retained pay” that the retailer gave to staff in 2007 when it closed a number of distribution centres and wanted to encourage existing staff to relocate to other sites. Tesco agreed with Usdaw that it would provide the top-up payments to staff who agreed to relocate and the right to receive them was then incorporated permanently into staff employment contracts.

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A separate clause in the contracts gave Tesco a right to dismiss the employee without cause. In 2021, Tesco - which is rivalled by the likes of Sainsbury's, Morrisons, Asda and more - sought to end the retained pay and told staff if they did not agree to the removal, they would be dismissed and rehired on lower-paid contracts.

These contracts wouldn't have had the top-up included. Tesco said it accepted the ruling and said: “Today’s judgment relates to a contractual dispute brought on behalf of a very small number of colleagues in our UK distribution network who receive a supplement to their pay.”

The supermarket added: “This supplement was offered many years ago as an incentive to retain certain colleagues and the vast majority of our distribution colleagues today do not receive this top-up. In 2021, we took the decision to phase it out. We made a competitive offer to affected colleagues at that time, and many of them chose to accept this. Our aim has always been to engage constructively with Usdaw and the small number of colleagues affected.”

A spokesperson for the Department for Business and Trade said: “We are committed to updating Britain’s employment protections so they are fit for our modern economy and the future of work. We will be bringing forward legislation soon to put an end to unscrupulous fire and rehire practices, which have no place in a modern labour market.”