Legal implications of P&O Ferries shock firing

The UK ferry operator P&O Ferries announced their decision on Thursday 17 March 2022 to cut 800 jobs with immediate effect. It was reported that workers were informed via a video message that “the company has made the decision that its vessels going forward will be primarily crewed by a third party crew provider” and that it was their “final day of employment”.

The announcement came as a surprise to employees as P&O had not consulted with them. The decision has sparked outrage with staff staging sit-ins on the company’s boats and staff staged protests across the country – but what are the legal implications of the decision of P&O Ferries?

Legal implications

Whilst redundancy is a potentially fair reason for a dismissal, there are certain rules which an employer must follow. In particular, they must warn and consult employees about the proposed redundancy, adopt a fair basis on which to select for redundancy and consider any suitable alternative employment.

If an employer is making 20 or more employees redundant at the same establishment within a 90-day period, then they are also required to follow a collective redundancy process.  This process has specific rules requiring the employer to provide information to, and consult with,  the employees’ representatives.

In a situation where there are 100 or more redundancies being proposed, the collective consultation process must start at least 45 days before any dismissals take effect.

P&O’s chief executive, Peter Hebblethwaite, appeared before the BEIS and Transport select committee on 24 March 2022 and conceded that there had been no prior consultation with staff as required under the Trade Union and Labour Relations (Consolidation) Act 1992 (“TULRCA”). He advised that this was because P&O had decided that it had no alternative in order to continue trading and that it was their assessment that “the change was of such magnitude that no union could accept our proposals”.

P&O’s failure to comply with the legal obligation to inform and consult raised questions regarding whether the decision they made is in fact unlawful and whether it will give rise to claims for unfair dismissal as well as any claims relating to the failure to inform and consult.

Potential consequences

A failure to comply with the rules on collective consultation can lead to a protective award being made against the employer by an Employment Tribunal.

A protective award is not based on loss of earnings but instead is more regarded as a ’fine’ for non-compliance with the rules and serves to highlight the seriousness of the employer’s failure to comply. The maximum protective award that can be awarded is 90 days’ gross pay for each dismissed employee and there is no cap on a week’s pay like there is for other types of claims.  Further, failures in the process could give rise to unfair dismissal claims from the individuals involved.

In addition, it was reported that a No10 spokesperson confirmed that they weren’t given any notice of the decision. This is important because under Section 193 of TULRCA, employers are obliged to notify the Secretary of State in situations where they are proposing to make 20 or more employees redundant. Under Section 194 of TULRCA, a failure to do this is a criminal offence and employers could be liable on summary conviction to a fine.

Following a request for further information from the government, P&O responded on 22 March 2022 advising that the affected employees were employed by Jersey companies and worked on vessels registered outside the UK. They advised that they did not give the Secretary of State the required notification because section 193A required to only notify the competent authorities of the states in which the relevant vessels are registered and that they did this.

On the 1 April 2022 the Insolvency Service confirmed that formal criminal and civil investigations have  begun into the circumstances surrounding the mass redundancies. If P&O are found to have breached the notification requirements under sections 193 and 193A then P&O and its directors could face prosecutions and potentially unlimited fines.

Government response

Transport secretary, Grant Shapps, made a statement to the House of Commons setting out measures which the government will take to protect seafarers’ employment right. This includes that HMRC will be checking national minimum wage compliance for all UK ferry operators.

In addition, the Government have said that they intend to introduce a new statutory code on fire and rehire tactics. This will detail how businesses must hold fair, transparent and meaningful consultations with employees about any proposed changes to employment terms. Tribunals and courts will be required to consider the code when considering cases and will have the power to apply an uplift of up to 25% of employee’s compensation where the code applies but the employer has unreasonably failed to follow it. However, at the time of writing we do not have further details on when this will be introduced or what the code will look like.

Undoubtedly many organisations are facing decisions on redundancy in the wake of the pandemic, but employers need to make sure they are aware of their legal obligations.  Please do not hesitate to contact us for advice if you are considering making redundancies.