P&O Ferries: A breakdown
In order to comply with UK law, P&O should firstly have considered whether there was a genuine redundancy situation.
Earlier this Spring (17 March 2022) P&O Ferries made national news when it was announced that almost 800 staff members were to be dismissed without warning by reason of redundancy.
Since then, there have been rallies and protests up and down the country after it was revealed that P&O intended to replace its staff with agency workers, who would be paid around £5.50 per hour (the national minimum wage for over 23s in the UK is £9.50 per hour).
The announcement was allegedly made to staff via a pre-recorded video message (although this is denied by the company) with no warning or consultation. They were told that they would receive an enhanced redundancy package (higher than their statutory entitlement), but only if they agreed to sign up to an agreement that waived all of their legal rights against the company by a deadline of 31 March.
Were any laws broken?
Legally, there was some confusion initially as to whether P&O’s approach had been in breach of UK employment law. Boris Johnson proclaimed that it had, but doubts were soon cast on that statement.
Under UK employment law, where there is a proposal to make 20 or more redundancies within a 90-day period, the Secretary of State at the Department of Business, Energy, and Industrial Strategy (BEIS) must be notified, which P&O did not do. Failure to notify BEIS is a criminal offence and carries an unlimited fine. However, laws made in 2018 mean that the position may be slightly different for seafarers. Where a ship is registered to another country (P&O’s ships were registered to Barbados, Bermuda, and Cyprus) then the employer’s obligation is arguably to inform the relevant authorities in those countries about the proposed redundancies, rather than the UK authorities. P&O state that they did notify the relevant authorities on 17 March, the same date the announcement was made.
Following calls to reverse the decision and reinstate the staff, Peter Hebblewaite, CEO of P&O, stated that the company had lost £100 million last year and that reversing the decision would undoubtedly cause the firm’s collapse, putting a further 2,200 jobs at risk. He confirmed that they had ‘painstakingly explored all possible alternatives’ but had chosen not to consult prior to making the announcement as their proposals were at such a level that no union ‘could possibly accept’ them. Instead, the company chose to bypass consultation with a promise to compensate staff ‘in full’. Hebblewaite went on to state that no staff member would receive less than £15,000 and that a handful were receiving in excess of £100,000.
So, what is the correct process?
If P&O were subject to UK law, in order to comply, they should firstly have considered whether there was a genuine redundancy situation, either within the business as a whole or within a certain site, function, or role. If the firm was losing £100 million each year, it would presumably not be difficult to demonstrate that there was a genuine need to make people redundant (or at least a requirement to reorganise staff so that the same jobs could be done by fewer people). However, if it is correct that P&O replaced the dismissed staff with cheaper agency workers, then this could undermine those arguments.
Where there is a recognised trade union (which there was here), then it must be consulted. If it is proposed that 100 or more redundancies will be made, the consultation period needs to last for a minimum of 45 days and the union must be provided with relevant information. This includes, amongst other things, the reason for the proposed redundancies, the number of employees potentially affected, the proposed method for establishing who will be made redundant / who will remain employed and how redundancy payments will be calculated.
Next, there must be actual meaningful consultation. There must be a genuine attempt at reaching an agreement with the union through discussions around how the redundancies can be avoided, how the number of affected employees can be reduced and how the consequences can be mitigated.
Failure to comply with these rules can lead not only to unfair dismissal claims (which can be extremely costly), but also protective awards of up to 90 days’ pay per employee for failures to inform and consult under the rules. UK employment law does not routinely allow an employer to ‘buy out’ an employee’s claim to for a protective award by increasing their redundancy payment.
What are the consequences?
Since the announcement, the government has committed to introducing legislation to ensure that only ships that pay workers at least the National Minimum Wage will be allowed into UK ports (with a wider impact on shipping companies other than P&O). Whilst this won’t have an immediate impact, it does mean that P&O may need to rethink any strategy that involves hiring agency workers on less than £6.00 per hour. Unions have criticised the government’s move by stating that it is a ‘rushed’ attempt to show action being taken. It is unclear how these new rules would be policed and enforced without causing significant disruption.
In addition, three P&O ferries have since been detained following failed safety inspections (with at least one since released). P&O stated that the safety inspections had reached an ‘unprecedented level of rigour’ in recent times. Whilst this might just be coincidence, it may also highlight the risks inherent in replacing staff ‘en-masse’ and the challenges involved training up large numbers of new starters effectively.
Of the 786 affected staff members, all but one have reportedly signed up to agreements, whereby they were promised enhanced settlement packages in exchange for their waiving of any rights against the company. Those agreements will almost certainly be covered by confidentiality clauses and so the details are unlikely to become public knowledge. The agreements mean that the staff cannot pursue any claims against P&O in relation to anything connected to their employment or the termination of their employment.
For the one individual who has allegedly made an Employment Tribunal claim, seeking a whopping £76 million in damages in order to create a trust to campaign for better wages and to outlaw ‘fire and rehire’ practices, only time will tell as to how far that claim is followed through. P&O will most likely seek a settlement of the claim, which would also likely be covered by confidentiality rules.
To bring successful claims of unfair dismissal, the P&O staff would first have had to demonstrate that their employment was governed by UK law and the UK employment tribunals had jurisdiction to hear their complaints. For ‘peripatetic’ employees who work at sea, this can involve a complex factual analysis. As the majority of these claims have been or look set to be settled, we are unlikely to ever find out the employment tribunals’ view on this, or the potential extent of P&O’s legal liability.
However, whilst legally there may have been a limited obligation on P&O to comply with UK employment law the backlash faced by them in the media, the government’s high-profile response and loss of public goodwill will almost certainly make any company trading in the UK think twice before following in P&O’s footsteps.
For further assistance, please contact one of our Employment law solicitors.