In April 2018, Sainsburys and ASDA (the ‘Retailers’) announced their intention to merge, with Sainsbury’s buying ASDA from Walmart for an estimated £7.3bn. During the announcement regarding the intended merger on 28 April 2018, the retailers stated that there were no planned store closures. However, was this pledge premature and too good to be true?
The Competition and Markets Authority (CMA) are currently investigating the impact of this merger on other supermarkets and on consumers. There is growing concern that post-merger, the retailers will hold too much of the market and thus there will not be enough competition for customers to choose from.
It is also feared that other retailers will have to increase their prices or make cost-efficiencies as a result. It has been reported that Tesco has announced 9,000 redundancies to achieve cost-savings and remain competitive on pricing.
Due to the concerns regarding market dominance, the CMA may insist that the merger can only proceed if up to 300 stores close (as reported by the BBC.) This in turn may trigger the retailers converting stores from one brand to the other, although (as far as we are aware) this is not currently planned. The CMA’s decision is expected on 5 March 2019.
Whilst the CMA’s focus is the retailers’ potential market dominance, its decision may also have significant and immediate implications for staff. Whilst employees in-store are likely to benefit from Union representation, many Head Office staff will need to obtain their own legal advice.
If the merger proceeds, employees from the retailers may be afforded additional protection (over and above their right not to be unfairly dismissed if they have two or more years’ service) under the Transfer of Under Takings (Protection of Employment) Regulations 2006 and their employment is to transfer from one retailer to another. TUPE protection against dismissal applies both pre and post-transfer, if the sole of principle reason for an employee’s dismissal is due to the transfer.
Whilst TUPE offers employees some protection against redundancy, if the employer has properly consulted and can show post transfer that there is an economic, technical, organisational reason to justify dismissals, then any resulting redundancies may be lawful. To circumvent the requirement for individual consultation or due to other commercial considerations, it is not unusual for employers to offer Head Office staff settlement agreements.
Whilst we have been unable to locate a policy to this effect, we know from representing ex-employees of major UK supermarkets that it has been commonplace for them to offer enhanced redundancy payments aligned with employee’s length of service if the employee signs a settlement agreement.
A settlement agreement is a legally binding contract between employer and employee whereby an employee agrees, but for a few exceptions, to waive all claims that they may have against their employer (such as TUPE or Unfair Dismissal), in exchange for a sum of money (some of which is usually tax-free). It is common for settlement agreements to contain a confidentiality clause meaning that employees cannot disclose that they have signed a settlement agreement or what they have been paid under the terms of the same.
We anticipate that settlement agreements may be offered to some Head Office staff, if store closures are indeed required by the CMA for the merger to progress.
How we can help
If you have been offered a settlement agreement from ASDA, Sainsbury’s or Tesco, we will be able to assist in renegotiating the terms of the settlement agreement, or simply advise you on its terms and effect. It is usual for your employer to contribute towards our professional fees.
An update on this story is available here: https://www.oakwoodsolicitors.co.uk/asda-sainsburys-merger-update/
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