Authored By: Laura Edijala
Coventry University
Employment law has undergone significant legal and policy development in relation to “fire and rehire” practices, whereby employers dismiss employees and rehire them on less favourable terms. The Tesco Stores Ltd v USDAW case engaged with several areas of employment law, including express and implied terms, the role of the law in employment contracts, and the use of “fire-and-rehire” tactics.1 This article examines the Supreme Court’s judgment in the case and considers the extent to which the decision reflects political concerns about “fire-and-rehire” practices.
Facts and Decisions
Tesco, a major supermarket chain, employed staff on contracts containing an express term granting a right to retained pay for life, offered as an incentive to encourage relocation following the closure of certain warehouses and the opening of new facilities at distant locations in 2007.2 This arrangement was expressly agreed with the trade union, and both parties signed the agreement. The contracts stated that retained pay was permanent and could change only through mutual agreement or upon promotion or voluntary shift changes. The contracts also permitted termination of employment by giving notice. In 2021, the supermarket decided to remove retained pay, offering 18 months of advance payments to those currently employed, under which their existing contracts would be terminated and replaced with new ones on lower pay terms. Many employees refused these new terms. The employees subsequently appealed the Court of Appeal’s initial decision, which had allowed the supermarket to terminate their contracts and offer new ones without retained pay.
The High Court ruled that “permanent” retained pay meant that the pay would remain in effect for as long as employees remained in their current roles.3 It held that removing the retained pay would render the promise of “permanent” meaningless. The courts therefore held that there must be an implied term preventing the employer from exercising its right to dismiss employees solely to deprive them of their retained pay.4 The courts examined analogous case law involving permanent health insurance provided to employees, where employers had not been permitted to use termination to avoid paying the promised benefit. The courts acknowledged that specific performance is usually unavailable in employment contracts; however, an injunction may be granted where the conditions for such relief are met — namely, that it is fair to grant the injunction and that the employer retains confidence in the employees.5 In this case, both conditions were satisfied because the supermarket still wished the employees to continue working for them. The courts also held that damages would not be an adequate remedy, as it would be too uncertain to calculate how long employees would have remained in their roles and the losses they would suffer. Accordingly, the High Court’s injunction restraining the supermarket from dismissing and rehiring on lower pay was upheld.
Case Analysis
The employment relationship is founded upon contract.6 Generally, courts are reluctant to intervene in voluntarily concluded contracts under the doctrine of laissez-faire.7 However, the law confers certain rights upon employees, such as protection against unfair dismissal, to prevent employers from abusing their superior bargaining position.8 In some instances, such as Yam Seng Pte Ltd v International Trade Corporation Ltd, it has been held that in employment contracts — particularly long-term relational ones where trust and cooperation are essential — there should be an implied duty of good faith.9 There are, nonetheless, criticisms of courts implying terms into employment contracts, on the basis that doing so may generate unpredictability. The Tesco case addresses employee protection and the debate over fire-and-rehire practices, and affirms that companies retain the right to dismiss employees with proper notice for reasons such as restructuring, misconduct, or redundancy, but cannot use that right to break contractual promises.10
It was confirmed that contractual dismissal rights can be restricted by implied terms where necessary, primarily to uphold the meaning of a contractual promise.11 In doing so, the courts considered the parties’ intentions and implied a term to the effect that employers should not be permitted to use the notice period to cancel an express term that guarantees employees a benefit for life.12 The case is also politically significant in that it directly engages with public and governmental concerns over fire-and-rehire practices.13 The courts relied on “Permanent Health Insurance” case law, which established that an employer cannot use termination to avoid paying a promised benefit.14 This means that where a permanent benefit has been granted — particularly where workers have given something up in order to enjoy it, such as relocating to a new city — that promise cannot be undone through fire-and-rehire tactics. The courts also extended this principle beyond permanent health insurance to other employment benefits, as in Jenvey v Australian Broadcasting Corporation, which applied the same reasoning to enhanced redundancy terms.15
The Tesco case has raised political concerns because, while it assisted the employees in this particular situation, it may not benefit others in the future.16 A collective agreement was negotiated offering a “permanent” benefit as an incentive for workers to relocate, and both parties agreed on this basis.17 The judgment may therefore have limited practical effectiveness. Following this decision, employers are likely to avoid using terms such as “permanent” in contracts, carefully drafting their wording to retain flexibility.18 As a result, the decision may protect only a narrow group of workers while leaving the majority exposed to similar fire-and-rehire practices under differently worded contractual arrangements. It has been argued that this outcome may have resolved the immediate contractual issue without addressing the political question of whether fire-and-rehire tactics should be prohibited more broadly.19 Accordingly, the judgment does not resolve the political debate about regulating or ending this practice, though it sets an important precedent for constraining extreme cases.
There is, however, commentary supporting the view that the courts acted before Parliament to address the problem of “fire and rehire”. The courts were able to limit abusive practices before the government sought to prohibit them through legislation.20 A government proposal, set for consultation in 2025 and implementation in 2026, would make dismissals automatically unfair in cases where employees refuse to accept contractual changes.21 This would effectively outlaw “fire-and-rehire” practices except in cases of genuine financial hardship. This reform signals that Parliament views fire-and-rehire practices as hostile to sound labour standards and contrary to the interests of workers.22
Although the Supreme Court decided the case on the basis of contractual interpretation, its decision aligns with this emerging policy agenda by restricting employers from using “fire and rehire” to remove guaranteed benefits. This nonetheless raises the concern that the judiciary is responding to political and social pressure before Parliament has acted. While this may be seen as a form of judicial activism in the protection of workers, it also raises constitutional questions about the separation of powers.23 Courts are traditionally expected to interpret the law rather than pre-empt government policy.24 Therefore, although the outcome may be favourable for employees, the method by which it is achieved could be viewed as sitting uneasily with orthodox constitutional principles.
Adams offers a more theoretical critique, centred on Lord Leggatt’s concurring view that an employer’s power to dismiss is a discretionary contractual power that must be exercised in good faith, drawing on Braganza.25 She argues that this reframing of dismissal exposes the vulnerability inherent in employment relationships and the gap between contract doctrine and workplace reality.26 However, it is submitted that this critique may overstate the judgment’s wider significance, as the majority avoided recognising any general good-faith duty in dismissal, reflecting judicial caution about encroaching on the statutory unfair dismissal regime.27 This limits Lord Leggatt’s influence and supports Leonhardt’s view that the case does not impose a broad constraint on employers’ termination rights.28
From the employer’s perspective, this judgment may be viewed as unduly restrictive. Businesses often rely on “fire and rehire” as an economic survival tool when facing financial pressure or market disruption.29 By limiting this flexibility, the court may inadvertently increase the risk of large-scale redundancies or business closures. This raises an important question about whether judges, rather than Parliament, should be shaping economic policy through the development of case law.30
Conclusion
The Supreme Court’s decision in Tesco Stores Ltd v USDAW represents a meaningful, albeit limited, advance in the protection of workers’ rights and the recognition of unequal bargaining power in employment relationships. However, its narrow factual application and potential impact on contractual certainty suggest that it offers only a partial solution to the wider problem of fire-and-rehire practices. While the judgment represents an important ethical and legal stance, comprehensive legislative reform remains necessary to ensure consistent and fair protection for all workers.
Footnote(S):
1 Tesco Stores Ltd v USDAW [2024] UKSC 28.
2 Ibid.
3 Ibid.
4 Ibid.
5 Powell v Brent LBC [1988] ICR 176.
6 Ian Smith and Owen Warnock, Employment Law (6th edn) 2.2.1.
7 The Moorcock (1889) 14 PD 64 (CA).
8 Employment Rights Act 1996.
9 Yam Seng Pte Ltd v International Trade Corporation Ltd [2013] EWHC 111 (QB).
10 Tesco Stores Ltd v USDAW [2024] UKSC 28.
11 Ian Smith, ‘Employment law brief’ (2024) 174 NLJ 8090, 9.
12 Tesco Stores Ltd v USDAW [2024] UKSC 28.
13 Ibid.
14 Aspden v Webbs Poultry and Meat Group Ltd [1996] IRLR 521.
15 Jenvey v Australian Broadcasting Corporation [2002] IRLR 520.
16 ‘USDAW & Ors v Tesco Stores Ltd [2024] UKSC 28 — Supreme Court Restores Final Injunction to Restrain Tesco’s “Fire and Re-hire”‘ (Old Square Chambers, September 2024) <https://oldsquare.co.uk/usdaw-ors-v-tesco-stores-ltd-2024-uksc-28-supreme-court-restores-final-injunction-to-restrain-tescos-fire-and-re-hire/> accessed 6 November 2025.
17 Ibid.
18 Ibid.
19 Halsbury’s Laws of England: Annual Abridgement, Employment <https://plus.lexis.com/api/document?collection=analytical-materials-uk&id=urn:contentItem:6FK2-NTS3-RS2H-14DN-00000-00&context=1001073> accessed 6 November 2025.
20 Christopher Fisher, Tejmin Kishun and David Andrews, ‘The UK Employment Rights Bill: Where Are We Now?’ (Mayer Brown, 2 July 2025) <https://www.mayerbrown.com/en/insights/publications/2025/07/the-employment-rights-bill-where-are-we-now> accessed 17 November 2025.
21 Ibid.
22 Ibid.
23 AV Dicey, Introduction to the Study of the Law of the Constitution (10th edn, Macmillan 1959); Mark Elliott and Robert Thomas, Public Law (4th edn, OUP 2020).
24 Ibid.
25 Braganza v BP Shipping Ltd [2015] UKSC 17.
26 Zoe Adams, ‘Critique of Employer Dismissal Powers after Tesco v USDAW’ (2025) (forthcoming).
27 Ibid.
28 Ibid.
29 Tesco Stores Ltd v USDAW [2024] UKSC 28; David Cabrelli, ‘Judicial regulation of fire and rehire practices’ (2024) 53 Industrial Law Journal 367.
30 Tesco Stores Ltd v USDAW [2024] UKSC 28; Mark Elliott and Robert Thomas, Public Law (4th edn, OUP 2020).
