Tesco Stores Ltd (Respondent) v Union of Shop, Distributive and Allied Workers and others (Appellants) The Supreme Court

In Tesco Stores Ltd v Union of Shop, Distributive and Allied Workers, the Supreme Court considered the interpretation of a collective agreement that incorporated a term concerning "retained pay" into the employees' contracts of employment. The employees, who had relocated to new distribution centres at Tesco's request, argued that the retained pay term should be interpreted as meaning that the pay would remain a permanent feature of their contractual entitlement, thereby preventing Tesco from terminating their contracts for the purpose of removing the retained pay. Tesco argued that the term simply meant that the pay would continue as long as the employment contract endured, without any limitation on its contractual right to terminate the contract on notice. The Supreme Court held that the term should be interpreted as ensuring that retained pay would remain a permanent feature of the employees' contractual entitlement, but only as long as their employment in the same role continued, and subject to certain specified qualifications. However, the Court found that Tesco's right to terminate the contracts on notice could not be exercised for the purpose of removing or diminishing the employees' right to retained pay, as this would defeat the purpose of the retained pay term. The Court held that an implied term should be read into the contracts to this effect, which was necessary for business efficacy or so obvious that it went without saying. The Court also held that an injunction, amounting to indirect specific performance, should be granted to prevent Tesco from terminating the contracts for the purpose of removing retained pay, as damages would not be an adequate remedy.