Tesco's attempt to end retained pay for employees thwarted as Supreme Court restores injunction.
In an important decision, the UK Supreme Court upheld an injunction relating to a bitter contract dispute and barred Tesco's intention to terminate and rehire staff at its distribution hubs. In the case of Tesco Stores Limited v. Union of Shop, Distributive and Affiliated Workers (Usdaw) and others, the court reached a majority verdict.
The issue concerned Tesco's attempt to terminate employee contracts in order to eliminate the right to "retained pay," a benefit that had been agreed in 2007 to encourage staff transfer in the wake of a distribution center closure. Retained pay, amounting to 32-39% of employees' wages, was promised as a permanent benefit in exchange for the workers' move to a new site.
In 2021, Tesco sought to eliminate this retained pay, offering an advance payment for employees to relinquish their rights or face termination and rehire. The affected employees challenged this move in court. Initially, the High Court sided with the workers, but the Court of Appeal reversed the decision before the matter reached the Supreme Court.
The Supreme Court, led by Lord Burrows and Lady Simler, emphasized that the retained pay was intended to retain experienced employees and make relocation appealing. The court noted that Tesco had not specified any end date for the retained pay or conditions under which it could be withdrawn.
The judgment highlighted that while Tesco could have terminated contracts for reasons other than stripping retained pay, it failed to do so. The court found that damages would be inadequate and reinstated the High Court's injunction, effectively blocking Tesco's plan.
Tesco accepted the ruling, stating its commitment to fairness and valuing the critical role of its distribution center employees. The company expressed its intention to ensure equitable treatment for all staff.
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