Key Takeaways

• An employer who cannot agree changes to an employment contract with the employee may eventually decide to terminate the contract on notice and offer the employee a new contract to take immediate effect from the termination of the first on the new terms. This process is known as dismissal and re-engagement, or more colloquially, "fire and rehire". 
• Pre-contractual statements are relevant to contractual interpretation only if the statements clearly indicate the mutual intentions of the parties. On the facts here, it was not the parties' mutual intention that the contracts would continue for life, or until normal retirement age, or until the closure of the site concerned. The parties also did not mutually intend to limit the circumstances in which the employer could bring the contracts to an end. There was no evidence that anyone addressed their mind to the possibility of firing and rehiring the employees. The express terms of the contracts should be given their natural and ordinary meaning so that the employer would have the right to give notice in the ordinary way and that the entitlement to this particular element of contractual pay would only last as long as the particular contract. 
• The Court of Appeal dismissed the claimants' argument that protection from dismissal should be implied into their contracts. On the facts, it was far from clear what term is to be implied, and the court was not satisfied that the test of obviousness was satisfied. If an officious bystander had asked whether the employees had the right to remain in post (unless the site closed) for the rest of their lives, the claimants and the employer would give opposing answers. 
• Finally, the court also held that, even if the High Court had been right to find for the employees on liability, this decision would not have justified the grant of an injunction. There is no authority for a court to grant a final injunction to prevent a private sector employer from dismissing an employee for an indefinite period. As an employee's remedy for breach of contract is invariably financial, damages would have been an adequate remedy. 
• The Court of Appeal's decision is reassuring for employers. However, the case is nonetheless a reminder to employers that they should think very carefully about how they communicate any contractual changes, and in particular, not to make promises about its permanence if there is a chance that they may need more flexibility later.

USDAW and others v Tesco Stores Ltd

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