Fire and Rehire. The USDAW v Tesco Case Example
Employment Update By Kate Palka
USDAW v Tesco
The USDAW v Tesco case throws some interesting light on ‘fire and rehire’.
Tesco proposed to remove “permanent retained pay” terms by dismissing staff and offering to re-engage them on inferior terms and conditions. The High Court granted an injunction which the Court of Appeal overturned. The case has been heard in the Supreme Court – but there is no decision yet.
The main takeaway is to always use clear language when offering benefits as an incentive – clearly state that they could be subject to change or withdrawal in the future.
More generally, the case is of interest due to increasing criticism of ‘fire and rehire’ as a practice. Although there have been calls to ban the practice outright (particularly following the 2022 P&O ferries headlines), it currently remains lawful in the UK and can be a useful mechanism in the right circumstances.
Statutory Code of Practice on ‘fire and rehire’
The Code is clear that fire and rehire must be a last resort. It requires employers to first contact ACAS, which is new.
The Code recommends that employers should engage with employees and/or their representatives “as early as reasonably possible”, share “as much information … as reasonably possible” and engage in consultation “for as long as reasonably possible”. However, the Code does not prescribe specific timescales, deadlines or content for information-sharing and consultation.
As a statutory Code, a Tribunal would be able to apply an uplift of up to 25% to an employee’s compensation where their employer unreasonably fails to follow it.
The Code emphasises the existing legal and reputational sensitivity of ‘fire and rehire’ but does not significantly change the law in this area. From a legal perspective, it does not provide guidance on what circumstances will constitute “some other substantial reason” justifying dismissals in the context of negotiations over contractual changes, which provides the basis for lawful ‘fire and rehire’ dismissals.
Note, the Labour Party remains committed to outlawing the use of dismissal and re-engagement.
Given its legal, reputational and industrial relations risks, ‘fire and rehire’ is typically reserved for circumstances where distressed employers would otherwise be forced to make redundancies. Further restrictions on the practice may therefore have the unintended consequence of making job losses and layoffs more – not less – likely in future.
Get in touch
If you’re looking for some tailored employment advice for your business, please do get in touch on 020 3056 8538 or info@thelegaldirector.co.uk.
And download our Your People guide for the foundations of establishing a living people strategy.
