P&O Ferries: Scandal at Sea?
On 17 March 2022 news broke that P&O Ferries (“P&O”) had made almost 800 of its maritime staff redundant. Although P&O have quashed rumours of ‘taser-trained security guards with handcuffs forcibly removing workers’, it is clear that the legislative rules that protect workers from unfair dismissal may not have been followed.
The social and political fallout from the seemingly brazen disregard for UK employment law has swept media outlets in recent weeks, amid allegations of employment and corporate loop-holes being exploited.
In this blog we explore the topic of redundancy in UK employment law and assess how P&O got it so wrong.
What does the law say?
Under the Employment Rights Act 1996 (the “Act”), an employee who has at least two years continuous service with their employer has the statutory right not to be unfairly dismissed. There are five potentially fair reasons under the Act and redundancy is one of these.
In order to prove that the redundancy is fair, employers must firstly be able to show that the business in which the employee works has or will cease to exist or that the requirements of the business for employees to carry out that work has ceased or diminished (or will cease or diminish). Once this has been established the procedure for redundancy must be fair.
Failing to meet these criteria render an employer liable for a claim of unfair dismissal in the Employment Tribunal. The maximum compensatory award for unfair dismissal claims (as of 06 April 2022) is £93,878.
Additionally, where an employer is proposing to make 20 or more employees redundant within a period of 90 days, additional duties arise under section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 (“TULRCA”).
One of these duties is that employers must collectively consult with employees (or recognised trade unions). Where an employer is proposing to make between 20-99 employees redundant the consultation must begin at least 30 days before the first dismissal takes place. This rises to 45 days when redundancies are proposed for 100 employees or more. The maximum protective award for failure to collectively consult is 90 days’ gross pay per affected employee.
Further, under section 193 of TULRCA employers are required to notify the Secretary of State of proposed collective redundancies. Failure to notify the Secretary of State is a criminal offence, leaving the employer liable to an unlimited fine. The Secretary of State does not need to be notified if an employee works overseas, and this includes ships that are registered at a port outside of Great Britain.
What did P&O get wrong?
In assessing the approach P&O has taken in making 786 of its employees redundant, it is clear that they did not follow the legislative rules.
According to the widespread news reports, the decision by P&O to make employees redundant is the first step in replacing those dismissed staff with cheaper, flexible, overseas agency workers.
Herein lies the first legal issue for P&O. As assessed, in order to fairly dismiss an employee for reasons of redundancy under the Act, the statutory definition of redundancy must have been met. This is that the business has or will cease to exist, or the requirements of the business for employees to carry out work of that particular kind has ceased or diminished (or will cease or diminish).
In hiring overseas agency workers to replace employees, it is clear that the business or work has not ceased to exist, and thereby in P&Os case it is not a redundancy scenario. The Employment Tribunals have recently shown that they are willing to uphold a claim for unfair dismissal for incorrect reasons.
Secondly, P&O did not follow any form of redundancy process, nor did they collectively consult with employees or its recognised trade unions.
Lastly, the issue has been raised that P&O did not notify the Secretary of State. This issue is less straight forward following statutory amendments made to TULRCA in 2018. These amendments removed the obligation on employers to notify the Secretary of State of mass redundancies in ships registered overseas. In a letter to the Secretary of State dated 22 March 2022, P&O claimed that the places of registration of the affected vessels were in Bermuda, the Bahamas, and Cyprus. It would seem that, following the statutory amendments, P&O may not have had an obligation to notify the Secretary of State regarding the redundancies.
In defence of their actions, the drum that P&O have been beating is that they have offered the affected employees ‘generous compensation packages’. They go further in the aforementioned letter to suggest that over 500 of the 786 employees have accepted and signed settlement agreements.
Whilst critics have been quick to lambast P&O for ‘paying their way out’ of their obligations, settlement agreements are commonplace and can often appear as a more commercially attractive option to protracted litigation, for both employers and employees. These agreements extinguish any claim that an employee might have against an employer at the time of signing (excluding any latent personal injury claims and claims in relation to accrued pension entitlements) in return for financial compensation.
If media reports are accurate, P&O have set aside a fund of £36.5m to accommodate settlement agreements and have offered figures beyond what employees would be entitled to under legislation. Although technically P&O would be ‘paying’ their way out of their statutory obligations, objectively speaking, it may be the preferable option given the circumstances for employees.
In summary, after a short assessment of the facts it is clear that P&O have breached some of their statutory duties to their employees. The fact that the ‘redundant’ positions are being filled with cheaper labour contradicts the definition of redundancy leaving P&O liable to unfair dismissal claims. Any claim made at the Employment Tribunal would be further strengthened by the fact that P&O failed to consult with any employee or with their recognised unions.
Commercially, it seems that P&O may have ‘taken a view’ on their liability for unfair dismissal claims and judged it more cost effective to offer enhanced settlement agreement packages to employees. As mentioned this is not uncommon and can often be the preferable scenario for both parties.
If P&O did forecast for a worst-case scenario, they may have been surprised by the massive political, social, and media fallout that has since ensued. P&O might avoid the Employment Tribunal, but they have certainly landed themselves centre stage in the court of public opinion.