CASE UPDATE: Supreme Court Reinstates Tesco Injunction

In 2007, Tesco underwent a warehouse reorganisation, resulting in widespread relocations. To avoid the potential for redundancies, Tesco entered negotiations with USDAW (the recognised trade union) and agreed to provide a ‘Retained Pay’ benefit. This benefit was offered to employees who chose to stay and relocate. It was set out in employment contracts as a ‘permanent’ payment, issued monthly. However, in 2021, Tesco sought to eliminate Retained Pay by dismissing and rehiring staff under new contracts that excluded this provision. 

USDAW successfully obtained an injunction from the High Court, preventing Tesco from ending the relevant employment contracts. The High Court ruled that an implied term existed in these contracts, restricting Tesco from terminating them with the intention of removing Retained Pay. This decision was later overturned by the Court of Appeal, which concluded that no such implied term was present. The Court of Appeal found that Tesco had the right to issue a notice of termination in the usual manner, and that the entitlement to Retained Pay would only last as long as the current contract was in effect. 

USDAW challenged this ruling in the Supreme Court. The Supreme Court, reversing the Court of Appeal’s decision and reinstating the injunction, held that Tesco’s contractual right to terminate employment with notice was constrained by an implied term. Specifically, this implied term prevented Tesco from dismissing employees for the purpose of depriving them of their Retained Pay rights. 

While the specifics of this case may limit its broader application, it highlights rare situations where an employer’s right to enforce an express contractual term, such as the right to terminate with notice, can be curtailed by an implied term. Similar rulings have been made in cases involving attempts to remove rights to permanent health insurance benefits, as seen in Aspden v Webbs Poultry. 

If you have any employment law queries or concerns, please contact our Employment Team on 01635 896336 or hello@fentonelliott.co.uk.