Tesco Loses UK Top Court Ruling on ‘Fire and Rehire’ Policy
(Bloomberg) -- Tesco Plc’s controversial “fire and rehire” tactic to take back ex-employees on cheaper terms is unlawful the UK’s top court ruled, in a blow to the British grocer also embroiled in a slew of high profile workers’ rights cases.
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Tesco’s policy to fire employees and then rehire them with lower pay was not legally permissible, the Supreme Court ruled overturning lower court decision that Tesco won in 2022. Tesco’s right to dismiss its employees cannot be used to deprive them of the right to retained pay, the judges said in the ruling.
Employee rights at large employers are under intense scrutiny after last month’s equal pay victory secured by workers at Next Plc — a rulings that could cost the retailer as much as £30 million in back-pay.
Grocers including Asda Group Ltd., J Sainsbury Plc, and WM Morrison Supermarkets Ltd., are also facing similar claims from tens of thousands of retail workers, with the total possible compensation estimated to be as much as £8 billion ($10.4 billion).
The “fire and rehire” policy came under scrutiny in the UK after P&O Ferries sought to fire hundreds of its crew and replace them with cheaper labor. British Airways Plc’s attempts to take advantage of the policy during the Covid-19 pandemic were thwarted by industrial action and the policy was scrapped.
Thursday’s case relates to Tesco’s distribution center workers who were either fired or forced to move 40 miles (64 kilometers) to a new place of work in 2009. Tesco later announced that it intended to fire the employees who chose to move and offered to rehire them on lower pay.
“These sorts of tactics have no place in industrial relations,” said Paddy Lillis, the general secretary of the Union of Shop Distributive & Allied Workers that brought the claim.
Tesco treated its employees as if they were “servant” and it was the “master”, lawyers representing the workers argued during the Supreme Court hearing earlier this year.
“Our objective in this has always been to ensure fairness across all our distribution center colleagues,” Tesco said after the ruling. “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.”
In July the new Labour government issued a code of practice on addressing “fire and rehire” tactics saying employers must take all reasonable steps to explore alternatives and use the policy as a last resort.
Labour has pledged to introduce legislation on workers’ rights in its first 100 days in power, including tighter rules on zero-hour contracts and making workers eligible for sick pay from the first day on the job, which will then be consulted on with businesses and trade unions before becoming law.
--With assistance from Deirdre Hipwell.
(Updates with claimants’ comment in the seventh paragraph.)
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