Last reviewed 9 February 2022

Many employers are concerned that their employees will raise a claim against them to the employment tribunal, so do everything possible to mitigate risks and avoid this happening. However, it’s important to remember that even where there may not be viable employment tribunal claims, employees, workers, self-employed individuals and trade unions may still be able to take action against organisations through the civil court system. Two recent cases have highlighted this issue well, both on the topic of pay.

USDAW v Tesco

The trade union, USDAW, was granted an injunction against Tesco to stop them from using fire-rehire practices. This tactic has been publicly criticised lately and strongly discouraged from industry bodies such as ACAS and CIPD from both a moral and a legal viewpoint. However, in addition to subsequent tribunal matters and reputational damage, this judgment opens up the potential for a different style of argument.

The union understood that an employment tribunal claim for unfair dismissal — employees were told that they would be dismissed under their current terms and re-engaged on new terms following a consultation process — would have a limited chance of success due to Tesco’s ability to argue sound reasoning for undertaking this procedure. As such, they adopted a different approach by filing an injunction to the High Court on behalf of 42 of its members. Where an injunction is granted, it means the employer cannot take the action that they had wanted to. In this case, Tesco were prevented from terminating the contracts of the affected employees.

The initial reason for undertaking the fire-rehire approach was Tesco’s decision to stop giving workers “retained pay”; a contractual benefit which was promised to never be removed. Employees had been told that it was a “permanent feature” and “protection for life”. The High Court decided it was an implied term of the benefit that Tesco could not terminate contracts in order to remove it.

Whilst the facts of the case are specific to this particular benefit and the implied term, the principles may be applicable to other organisations who wish to dismiss employees and re-engage them on less favourable terms and conditions. As such, employers should keep in mind that, even if they consult fully, and have a justifiable business case and negotiate with employees, so safeguard themselves against employment tribunal claims, there still may be an underlying risk that they will not be able to enforce changes to existing terms (especially those relating to benefits that had been conveyed as permanent), as a High Court could approve an injunction to prohibit dismissal to achieve this.

Abellio v Thomas

In this case, the claimant was employed as an Area Manager for Leicester but accepted a new position as Area Manager for Nottingham. He was told that he would receive an increased salary for this role in recognition of the increased responsibilities attached to it. The claimant and the employer failed to agree on the increased wage amount and eventually his employment was terminated. He subsequently raised a claim to the Employment Tribunal (ET) for unlawful deduction from wages, arguing that he was entitled to a remedy in “unjust enrichment” (a quantum meruit payment) for the work he did in the “entirely different” position in Nottingham.

“Unjust enrichment” is when one party unfairly benefits at the expense of another; it usually is unintentional and often the result of a mistake. A quantum meruit payment is compensation based on market value, or the going rate, when a person receives less than is fair.

The ET agreed the employee should have been paid an increased salary whilst in that position and so allowed a claim for unlawful deduction from wages under Part II of the Employment Rights Act 1996. However, Abellio appealed the decision to the Employment Appeal Tribunal (EAT) who found the ET erred in applying the law. Instead, the EAT outlined that an unjust enrichment claim for a quantum meruit could not be brought under Part II of the 1996 Act since it did not fit within the structure of a claim for unlawful deduction from wages, so the EAT (and ET) did not have jurisdiction to make a decision on such matters.

The EAT added that, whilst a claim of this nature would have to be judged through the civil courts, had it had the appropriate jurisdiction, it would have awarded the employee a quantum meruit payment, since he is entitled to fair remuneration for the additional level of work completed in an entirely different role to that which was in the original employment contract. The EAT highlighted it hoped the parties could resolve the matter without the need for further litigation and expense.

Whilst the case confirms unlawful deduction from wages claims cannot be argued in these situations, it highlights the importance of employers fairly paying their staff members and following through on promises of higher wage offerings. It also shows the benefits of regularly reviewing and comparing remuneration packages against competitors and fair market value, as this is what a civil court would look at when determining appropriate compensation.