If an employer offers a ‘permanent’ pay premium to staff, does that mean that it cannot later terminate and re-engage staff to remove that premium?
No, held the Court of Appeal in Tesco v USDAW & others, overturning the High Court’s decision granting a permanent injunction against dismissal to a group of Tesco staff.
In 2007, Tesco offered warehouse staff a relocation package with a permanent pay premium, known as ‘retained pay’ and agreed to be outside the scope of collective bargaining, described in terms such as ‘guaranteed for life’, provided those employees were not dismissed for conduct etc. or promoted.
In 2021, Tesco sought to buy-out retained pay, then sought to dismiss and re-engage staff who objected. They brought High Court proceedings, obtaining a declaration, the court finding an implied term preventing any dismissal that simply removed retained pay. The court also granted a permanent injunction against dismissal, unfair dismissal claims being an insufficient remedy.
The Court of Appeal overturned the High Court. There was nothing offered in the pre-retained pay discussions preventing Tesco giving notice in the normal way to end it; the proposed implied term was inconsistent with the general right in the contract to dismiss; pre-offer language, such as ‘guaranteed for life’ was too vague to give rise to an implied term; this situation was not akin to the prohibition of dismissal where a capability dismissal would prevent a PHI claim, and there was no basis for an estoppel claim. Regarding the permanent injunction, even had the staff won on the right to ‘permanent’ retained pay, the Court knew of no cases where a private sector employer had been injuncted against dismissal for an indefinite period, unlike injunctions preventing dismissal, e.g. where a specific contractual disciplinary procedure is required. The injunction’s terms weren’t clear, the employer might be in contempt when making redundancies many years later. The remedy for a wrongful dismissal at common law is almost invariably financial.
In Scotland, arising from the same scenario, there is a temporary interdict by the Outer House against dismissal pending final trial.
Thanks to Ed McFarlane for preparing this case summary.
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