In 2007, Tesco re-organised its warehouses resulting in mass relocations. As an alternative to potential redundancy, Tesco negotiated with USDAW (the recognised trade union) that it would give any staff who stayed on, and agreed to be relocated, a ‘Retained Pay’ payment which would be paid to them each month. Retained Pay was described in the contracts of employment as ‘permanent’. In 2021, Tesco attempted to remove Retained Pay by firing and re-hiring on new terms which excluded Retained Pay.

USDAW initially got an injunction from the High Court stopping Tesco from terminating the impacted contracts of employment. The High Court held that the contracts of employment were subject to an implied term that Tesco could not terminate the contracts for the purpose of removing Retained Pay. This decision was overturned by the Court of Appeal, who held that no such implied term existed; Tesco had the right to give notice in the ordinary way, and the entitlement to Retained Pay would only last as long as the particular contract endured.

USDAW appealed this decision to the Supreme Court. The Supreme Court, re-instating the injunction and overturning the Court of Appeal’s decision, held that Tesco’s right to terminate the employment contract, by giving the requisite notice, was qualified by a term implied by fact that Tesco’s right to dismiss could not be used for the purpose of depriving employees of the right to Retained Pay. 

The case is likely to be specific to its facts, but it does illustrate that there are exceptional occasions where an employer’s ability to exercise an express term of the contract of employment (here, the right to terminate a contract by giving contractual notice) will be limited by an implied term. Similar examples exist where an employer has tried to terminate employment to remove an employee’s right to receive permanent health insurance benefits (Aspden v Webbs Poultry).

Speak to Jon Dunkley

Jon is a Partner at Wollens and can advise you. Contact Jon via email jon.dunkley@wollens.co.uk or call 01271 341021.

You can also complete an online enquiry form. One of the Wollens team will contact you as soon as they are available.