Tesco Stores Ltd (Resp) v Union of Shop, Distributive and Allied Workers and others (App)

Background to the Appeal
This appeal concerns whether Tesco Stores Ltd (“Tesco”) can terminate the employment
contracts of its employees, for the specific purpose of depriving them of “retained pay” (“RP”),
a financial contractual entitlement which was agreed to be permanent. The appeal raises
fundamental questions about an employer’s right, under contract law, to terminate a contract
of employment by giving the requisite notice to the employee and about an employee’s
remedies for breach of an employment contract.
In 2007, Tesco decided to close certain of its distribution centres, to expand or restructure
others, and to open new sites. Tesco sought to incentivise existing employees at the centres
being closed to relocate to another site. Tesco and its recognised trade union, the Union of
Shop, Distributive and Allied Workers (“USDAW”), made a collective agreement under which
Tesco agreed to provide RP to employees who agreed to relocate.
The right to receive RP was then incorporated into the relevant employment contracts as an
express term. The RP term stated that RP would “remain a permanent feature” of an employee’s
contractual entitlement, subject to certain qualifications. A separate term in the employment
contracts gave Tesco a contractual right to dismiss the employee without cause, on provision
of specified notice.
In 2021, Tesco sought to end RP. It informed employees that, if they did not consent to
the removal of their right to receive RP, they would be dismissed and offered re-engagement.
The re-engagement terms would be identical, save for the removal of the RP term.
Together with USDAW, several employees in receipt of RP applied to the High Court, seeking
declarations as to the true meaning of the RP term, and an injunction to restrain Tesco from
terminating their employment to remove the RP term. In the High Court, Ellenbogen J
allowed the claim, and granted the injunction. The Court of Appeal, however, unanimously allowed
Tesco’s appeal. The claimants now appeal to the Supreme Court.