The High Court has granted an injunction preventing Tesco from “firing and rehiring” employees in order to remove a contractual entitlement to enhanced pay. While the facts of this case were unusual and it is unlikely to lead to a flood of similar cases, with the practice of “fire and rehire” coming under increasing scrutiny, we consider the implications for employers.

“Firing and rehiring” refers to the practice of making changes to employment terms by way of dismissal and re-engagement on new terms. Employers tend to go down this route where a variation can’t be agreed. However, this approach is not without risk. The key exposure will be to claims of unfair dismissal in respect of employees with unfair dismissal rights unless an employer can demonstrate the reason for the termination was “some other substantial reason” and that the dismissal was not unfair in all the circumstances.

In certain circumstances, a court may consider whether a term should be “implied” into a contract of employment to reflect the parties’ intentions. Whether or not a term is implied will depend on the facts of the particular case.

Background

When Tesco sought to restructure its distribution centres as part of its ongoing expansion in 2007/2008 this involved some closures and relocations. In order to retain experienced staff, Tesco offered some employees incentives to relocate to the new sites as an alternative to a redundancy package. This included an element called Retained Pay. In some cases,...

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