Fire and rehire

Research shows that one in 10 workers were dismissed and forced to reapply for their own jobs on worse terms during the first year of the Covid pandemic (“fire and rehire”). It is a controversial practice, but not illegal. Employers will argue “needs must” in these difficult times.

In USDAW v Tesco Stores Ltd [2022] 407, however, Ellenbogen J granted an injunction restraining Tesco from terminating the contracts of 42 workers who had a contractual entitlement to “retained pay” (which they had been offered in 2007 as an inducement to relocate) and offering to re-employ them on terms which did not include this benefit. She held that it was necessary to imply a term to the effect that Tesco’s right to terminate the contract on notice could not be exercised for the purpose of removing the employee’s right to retained pay.

The Court of Appeal has now overturned that injunction. It found that the judge had erred in finding that both parties had intended that the retained pay benefit should be permanent, even though a collective agreement negotiated by the union stated in terms that retained pay was “guaranteed for life”. That term could not be interpreted as meaning that the contracts would continue for life and / or that Tesco should not be able to exercise its contractual right to terminate them.

However, ACAS has published advice stating that fire and rehire is an extreme step that can seriously damage working relations and has significant legal risks for organisations. It goes on to note: “Employers should thoroughly explore all other options first and make every effort to reach agreement with staff on any contract changes. Organisations that consult with their workforce in a genuine and meaningful way about proposed changes can help prevent conflict at work and stay within the law.”