A shop workers’ union has won a Supreme Court battle against Tesco over so-called “fire and rehire” plans put forward by the supermarket giant.

The row erupted in 2021 after Tesco proposed firing staff at some distribution centres and rehiring them on lower pay.

The Usdaw union said it was “delighted to get this outcome”.

Tesco said it accepted the Supreme Court judgement which it said affected “a very small number of colleagues”.

In 2007, Tesco planned to close some of its distribution centres, and offered staff increased “retained pay” so they would relocate.

The union took legal action in 2021 after Tesco proposed getting rid of this retained pay by either offering staff a lump sum to replace it, or terminating their contracts and rehiring them without the increased salary.

Usdaw argued that the retained pay had been described as “permanent” in their contracts, so should be ongoing.

But Tesco described the pay as a “contractual mechanism” open to employers.

Usdaw brought the legal action with three Tesco employees who work at distribution centres in Daventry and Lichfield.

The employees are also voluntary union representatives, a union spokesman said.

The case affects roughly 50 people who work in those centres, he said.

There is a separate case involving workers at the Livingston distribution centre going through the Scottish courts which also affects about 50 people.

Usdaw won an injunction in 2022 which stopped Tesco from carrying out its plans, but Tesco successfully got that ruling overturned on appeal.

On Thursday the Supreme Court reversed that decision, saying Tesco’s right to stop employees’ contracts could not be used to take away their enhanced pay.

Five justices unanimously agreed that Tesco should be blocked from dismissing the staff.

The Supreme Court judges ruled that it was “inconceivable” that both Tesco and the union members intended for the supermarket to have the right to fire workers and rehire them on lower pay “whenever it suited Tesco’s business purposes to do so”.

“This would have been viewed, objectively, as unrealistic and as flouting industrial common sense by both sides,” the judges said in their ruling.

When it offered the retained pay deal at the beginning, Tesco could have stipulated that the deal would end, or that it could fire and rehire, but didn’t, the judges said.

Using the word “permanent” conveys that retained pay is not time-limited “in any way”, they added.

Paddy Lillis, Usdaw’s general secretary, said the union had been “determined to stand by its members” and that the “valuable benefit” was “a key component of their pay”.

The union had been “appalled when Tesco threatened these individuals with fire and rehire to remove this benefit” and said the “tactics have no place in industrial relations”.

Tesco said the “vast majority” of distribution centre workers “do not receive this top-up”.

It decided to “phase it out” in 2021 and “made a competitive offer to affected colleagues at that time and many of them chose to accept this”.

It added that distribution centre workers “play a really critical role in helping us to serve our customers and we value all their hard work”.

As part of its election manifesto, Labour pledged to ban the practice of fire and rehire.

A Department for Business and Trade spokesman said new legislation on that would be brought in “soon”.

Fire and rehire picked up pace during the coronavirus pandemic when a number of big businesses tried to dismiss workers and hire them back on worse deals.

British Airways, British Gas, bus company Go North West and coffee maker Jacobs Douwe Egberts were all accused of using the tactic.

Ferry operator P&O was also accused of similar tactics when it fired 800 of its workers in 2022, and then used an agency to replace the sacked staff.