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P&O Ferries redundancies

Adrian Fryer

Even for seasoned employment law practitioners, the decision of P&O to sack its entire workforce with no notice and by pre-recorded video came as a shock. No warnings, no consultation, no in-person discussions. Such was the shock and speed of the dismissals that some employees were unable to gather all their belongings in time. P&O’s plan is to reduce costs by replacing the entire 800-strong workforce with much cheaper agency workers to whom they believe the UK’s national minimum wage rules will not apply.

The Trade Union and Labour Relations (Consolidation) Act 1996 sets out rules about what must be done by businesses before making mass redundancies. Employers must engage in collective consultation if they intend to make 20 or more redundancies within a 90-day period. Consultation should start ‘in good time’ but at least 30 days before the first dismissal takes effect if proposing to dismiss 20 or more employees, 45 days if planning to dismiss more than 100. The business must also inform the government about plans at least 30 days (45 if more than 100 redundancies) before the first termination. Employers must also conduct individual consultation and give proper notice in accordance with employment contracts. Breaches of collective consultation laws carry the risk of a protective award of 90 days’ pay, uncapped, per employee, as well as breach of contract claims for unpaid notice and unfair dismissal claims.  Failure to inform the Business Secretary of intended mass redundancies can result in a criminal conviction (for the company and its officers) and a fine.

So why did P&O choose to ignore all of this? At the time of writing, there appear to be legal loopholes which take P&O’s actions outside some of these employment law rules, including the obligation to pay their new workers at UK minimum wage rates. P&O say employees will not suffer financially as they have offered them enhanced redundancy packages – presumably taking into account the cost of the legal breaches – if they sign settlement agreements agreeing not to bring claims. But the damage is done. With travel business profits decimated by two years of pandemic restrictions, the general public would have understood that P&O might need to take measures to ensure future profitability. No doubt employees and unions would have resisted redundancies, but perhaps accepted eventually that some change was inevitable. Doing things properly, giving employees both advanced warning and respect, may have cost little (if any) more than the enhanced packages they are now offering to pay. Its public reputation is in tatters.

The government has said it is going to take steps to change the law to ensure that all new P&O workers receive the national minimum wage. If those legal loopholes are closed, P&O’s costs savings may be significantly diminished. Whatever happens, the public perception of the business has certainly diminished. There may well be a greater cost in the long run, not only for bypassing the law but for the flagrant manner of so doing.

Adrian Fryer, Partner & Head of Employment

t: 0151 224 0539