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The pandemic has brought the industrial relations practice of “Fire and Rehire” into sharp relief. Already outlawed in several European states and according to the Fair Work Convention contrary to the Fair Work Principles endorsed by the Scottish Government, the Scottish Courts have recently upheld a legal challenge against the highly controversial practice.

In USDAW v Tesco Stores Limited, the Court of Session accepted the trade union’s argument that Tesco could not use “Fire and Rehire” to dismiss employees from their existing contracts of employment in order to employ them on new, less favourable, terms (until the matter could be considered at a full hearing). USDAW argued that Tesco had made clear and legally binding promises to their employees that a significant element of their core pay (“Retained Pay”) would never be removed, except “by mutual consent”.

For reasons which were unclear (after a year of record profits), Tesco decided that now was the time to remove the payment. However, when they couldn’t obtain the necessary “mutual consent” from employees by offering a large, one-off, lump-sum payment, they threatened to remove Retained Pay anyway, by using “Fire and Rehire”.

USDAW argued that Tesco’s proposal was in clear breach of the promises made when the payment was initially agreed. Tesco had promised that the only circumstance in which the payment would be removed was if it was agreed by the union or the individual employees through negotiation. It was implicit in that promise that any action by Tesco which sought to remove the payment without such agreement such as dismissing and re-engaging the employees on new contractual terms was in breach of the express promises which Tesco had made to their employees when the payment was introduced. The Court was asked to intervene to prevent such a clear, unlawful act from taking place, and agreed to do so.

While the Court’s intervention should make all employers think long and hard before going down the road of Fire and Rehire, every case will need to be considered on its own facts. If the promises made by Tesco about the circumstances in which Retained Pay could be removed had been less clear, the Court may have been less willing to intervene. Similarly, the fact that Tesco were trying to cut the pay of low paid, front-line workers in the face of record profits was unlikely to have garnered any sympathy from the Court.

Whatever the Courts may do in future, the bigger point is this: workers should not have to rely on risky, expensive and speculative Court action to force their employers to abide by the promises made in their employment contracts. The practice of Fire and Rehire can and should be outlawed for good. The UK Government has the opportunity to bring this practice to an end by offering to support Gavin Newlands Private Members Bill . Whether they do so will tell us a lot about whether the UK Government is prepared to do anything more substantial for low paid, front line workers than give them a round of applause.  

Blog by David Martyn, Head of Employment Rights Unit

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