Fire and re-hire’ tactics in the spotlight

News | 4 February 2022

Written by: Sarah Wilkinson
Senior Associate Solicitor

Written by: Sarah Wilkinson, Senior Associate Solicitor

The COVID-19 pandemic has shone a light on the use of dismissal and re-engagement tactics, also known as ‘fire and re-hire’ tactics, as a lawful means of implementing changes to employees’ terms and conditions of employment. During the pandemic, there have been a number of high-profile disputes involving the use of such tactics (for example, by British Airways and British Gas). These cases have highlighted that, under current law, the balance of power lies too much with employers.

Notwithstanding the above, in the recent case of USDAW and ors v Tesco Stores Ltd, the High Court took a stand in relation to this pertinent issue, by granting an injunction restraining Tesco from ‘firing and rehiring’ employees in order to remove a contractual entitlement to “Retained Pay” (an alternative to a lump sum redundancy payment provided as an incentive to staff to relocate). The Court noted that Tesco’s intention to ‘fire and rehire’ would operate to remove a significant proportion of the remuneration payable to employees. Given that their remedy would be limited to the losses recoverable in a claim for unfair dismissal, the Court concluded that it was just and convenient to make an order restraining Tesco from giving notice to terminate the contracts and from otherwise removing the Retained Pay from the affected employees, other than in accordance with their express agreement.

This case should serve as a reminder that the law will not allow employers to use their greater bargaining position to impose contractual variations on employees against their will. Employment contracts are no exception to the basic principles of contract law - contracts may only be varied in accordance with their provisions or with the agreement of all parties.

If you wish to make changes to your employees’ contracts of employment and would like our advice on how to do this lawfully, please get in touch with our Employment Team on 020 8290 0440.