The decision by P&O Ferries (“P&O”) to sack 786 employees (many via videolink) with immediate effect and without notice has caused widespread outrage. We look at what P&O did, or rather, what it did not do and whether it acted in contravention of UK employment law.
On 17 March 2022, 786 P&O employees were told that their employment was being terminated “with immediate effect on the grounds of redundancy”. These redundancies, many of which were communicated via videolink, came as an unwelcome surprise to the affected employees (and their representatives) who had not been informed or consulted about them. This has led to criminal and civil investigations by the government’s Insolvency Service.
What is the law on collective redundancies?
A collective redundancy situation is triggered when an employer proposes to make 20 or more employees redundant within a period of 90 days or less. An employer has a legal duty to:
- consult with representatives of the affected employees (section 188 Trade Union and Labour Relations (Consolidation) Act 1992 (“TULRCA”)); and
- notify the Secretary of State in writing of their proposal (section 193 TULRCA).
Collective Redundancy Consultation
An employer has a duty to inform and consult with appropriate representatives of the affected employees. Where those employees recognise a trade union, the trade union has to be consulted. TULRCA states that where an employer is proposing to dismiss 100 or more employees, then consultation must begin at least 45 days before the first dismissals (or 30 days for between 20 – 99 proposed redundancies), unless various “special circumstances apply”.
Consultation starts with the employer providing information to the representative as specified in section 188(4) TULRCA. Amongst other information, this includes telling the representative:
- the reasons for the proposal;
- who is at risk of redundancy;
- the proposed method of selecting employees;
- who may be dismissed; and
- the proposed procedure of dismissal.
This means that representatives are provided with sufficient information so that they can engage in meaningful consultation in order to avoid compulsory redundancies and to mitigate any effects of any redundancies.
Claims bought for failing to comply with the obligations under section 188 TULRCA may result in the employer being directed to make a protective award of up to 90 days gross pay. The intention of this award is not to compensate the employee for their loss, but instead to punish the employer.
Collective consultation is not a substitute for individual consultation which is important in proving that an employee’s dismissal was fair. Failure to consult either collectively or individually is likely to give rise to unfair dismissal claims, as discussed below.
Notifying the Secretary of State
An employer has to give advance warning to the Secretary of State, specifically, the Department for Business, Energy and Industrial Strategy (“BEIS”) – using a prescribed form “HR1: Advance Notification of Redundancies”. The employer must notify the BEIS at least 45 days before the first dismissals if the employer is proposing to dismiss 100 or more employees (or 30 days for between 20 – 99 proposed redundancies). Failure to notify the BEIS is a criminal offence and can lead to an unlimited fine.
Did P&O break the law?
Collective Redundancy Consultation
P&O have failed to comply with their duty to consult. P&O readily admit that they purposefully bypassed the consultation phase. In fact, its CEO, Peter Hebblethwaite, admitted to a parliamentary committee that “there is absolutely no doubt that we were required to consult with the unions, we chose not to do that”. Whilst he, perhaps surprisingly, recognised that “no union could possibly accept our proposal” he stated that they “took this course of action as a last resort” and that the only way to save the business was to move “to a model that is internationally recognised and widely used across the globe and by our competitors”. This new business model involves using off-shore agency workers whose wages are a fraction of what UK employees are entitled to. P&O have tried to justify their actions by saying that they will compensate affected employees “in full”.
Notifying the Secretary of State
In accordance with a 2018 amendment to TULRCA, the legal duty to notify the Secretary of State under section 193 TULRCA does not have effect where, in the case of a vessel, it is registered at a port outside Great Britain (section 193A TULRCA). Accordingly, P&O argue that because all the relevant vessels are registered outside the UK (in either Bermuda, the Bahamas or Cyprus) they are not subject to this legal duty, an argument that the government appears to have begrudgingly accepted, but which will likely lead to a change in the law.
For a dismissal on the grounds of redundancy to be fair, the employer must establish that there was a genuine redundancy situation, that redundancy was the real reason for dismissal and that the dismissal (on the grounds of redundancy) was reasonable in the circumstances.Normally, an employer will not be deemed to have acted reasonably if they fail to carry out either collective and/or individual consultation. For this reason, it is likely that the affected employees would be successful in a claim for unfair dismissal.
Knowing this, P&O have seemingly managed to avoid a wave of claims against them by offering enhanced redundancy pay to compensate individuals for their failure to comply with the law. Such payment is conditional on the employee entering into a settlement agreement in which they will waive any rights they have to make a claim and which will also contain non-disclosure obligations. Whilst the use of such an agreement is not wholly surprising, it raises moral questions relating to the use of settlement and non-disclosure agreements to brush potential unlawful actions under the carpet.
Consultation must be a two-way process in which the employer seeks to reach an agreement with the representatives. It is vital to a fair redundancy process for an employer to prove that they have genuinely sought to avoid making compulsory redundancies and mitigated any effects of any redundancies. Failure to comply with this legal duty, as well as with the duty to notify the Secretary of State, may come at a significant cost.
Although the government investigations are still ongoing, it looks like P&O might get off fairly lightly. The legal loophole that they have relied on relating to where the ships were actually registered, meaning that they didn’t have to notify the Secretary of State, could save them from criminal charges and an unlimited fine.
That being said, it’s hard not to question whether bypassing consultation was really worth it given P&O’s reputational damage, the sheer sum that it has been reported they have offered dismissed employees (a total of £36.5million), the disruption it has caused to the business as a result of services being suspended and the ongoing government investigations.
This article is provided by Burlingtons for general information only. It is not intended to be and cannot be relied upon as legal advice or otherwise. If you would like to discuss any of the matters covered in this article, please contact Helena Antoniou or write to us using the contact form below.