What lessons can employers learn from the P&O affair?
P&O has drawn widespread condemnation for the way that it has dismissed approximately 800 employees from its ferry services in the United Kingdom. The affair has drawn attention to UK employment law surrounding redundancies – so what lessons should employers learn from this?
On Thursday 17th March, P&O dismissed approximately 800 employees from its ferry services in the United Kingdom.
In a pre-recorded message played at numerous sites around the UK, P&O staff were told:
“The company has made the decision that its vessels going forward will be primarily crewed by a third-party crew provider. Therefore, I am sorry to inform you that this means your employment is terminated with immediate effect on the grounds of redundancy. Your final day of employment is today.”
There has been widespread condemnation of P&O’s actions. Transport Secretary Grant Shapps said “The way that these 800 loyal and experienced workers were treated by P&O Ferries last week was shameful and utterly unacceptable"
But was the sacking of 800 employees in this way lawful?
The key is whether the employees are protected by UK employment legislation.
There are a number of complicating factors which mean the answer to this is not straightforward. For example:
P&O Ferries is owned by DP World, based in Dubai
It has been reported that some of P&O’s ferries are registered overseas - for example the Pride of Hull’ ship is reportedly registered in the Bahamas
In 2019, P&O announced that, following the UK’s departure from the European Union, it would register much of its sailing fleet under the Cyprus flag
P&O’s head office for Crewing Services is based in Jersey.
If the employees who were dismissed are protected by UK employment law, then P&O’s actions were almost certainly unlawful.
Let’s take a look at the employment legislation that protects British employees.
Section 139 of the Employment Rights Act 1996 sets out the legal definition of redundancy, which can be summarised as follows:
An employee is made redundant if the dismissal is wholly or mainly attributable to the fact that:
the employer has ceased, or intends to cease, continuing the business, or
the need for employees to perform work of a particular kind, or to work at the location in which they are employed, has ceased or diminished, or is expected to do so.
P&O have stated that the staff have been made redundant. However, they also state that the work will in future be undertaken by “a third-party crew provider”.
As the work is clearly still available (P&O have stated that they intend to continue running the ships along the same routes) and the staff are being replaced by cheaper agency staff, it does not meet the legal definition of redundancy under UK Employment Law.
If the redundancy is not genuine, the employees who have been dismissed would have a strong claim for unfair dismissal.
Section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 (otherwise known by its abbreviation TULRCA) states that if an employer plans to make 20 or more people redundant, there is a minimum period of collective consultation required before the first of the dismissals takes effect. The length of the minimum period of consultation depends on the number of people who it is proposed to make redundant - if it is between 20 and 99, the minimum period is 30 days, and if 100 or more, it is 45 days. This consultation should explore ways of avoiding the dismissals, reducing the numbers of employees to be dismissed and mitigating the consequences of the dismissals.
According to news reports, P&O carried out no consultation whatsoever, instead just informing the affected staff they were to be dismissed with immediate effect.
If an employer does not meet consultation requirements, employees can make a claim to an employment tribunal. If the claim is successful, the employer may have to pay compensation to the affected employees. This is known as a 'protective award'. This can be up to 90 days' full pay for each affected employee.
The legislation does, however, provide a ‘special circumstances’ defence (Section 188(7) of TULRCA) where it is not reasonably practicable for an employer to comply with the consultation requirements. These ‘special circumstances’ are not defined in law.
ACAS state that such circumstances are “extremely rare” but should be “truly unexpected situations”. They go on to say that “…the employer would need to be able to prove it was not reasonably practical for them to comply with the consultation requirements. But they would still need to inform and consult employees as much as possible.”
Given the position set out by ACAS, it would be difficult to see how P&O could argue such a defence, especially given the widely reported accounts that they already had agency staff lined up and waiting on the dock to replace the dismissed staff and that external security contractors were engaged to remove staff from the ferries if necessary.
Employees who have been employed for over two years are entitled to statutory redundancy pay as follows:
Half a week’s pay for each full year they were under 22
One week’s pay for each full year they were 22 or older, but under 41
One and half week’s pay for each full year they were 41 or older
Length of service is capped at 20 years and weekly pay is currently capped at £544 but from 6th April 2022, this will rise to £571. All figures are gross pay (i.e. earnings before tax).
Following UK legislation, any P&O employees with more than two years’ service who have been made redundant, regardless of the lack of consultation process, will be entitled to redundancy pay.
P&O dismissed the employees with immediate effect. So, are the staff entitled to notice pay?
The answer is ‘yes’ - when employees are made redundant, they are entitled to notice pay in addition to any redundancy pay. This is irrespective of whether the staff actually work their notice period.
The notice period is whichever is higher of the contractual notice (i.e. what the contract sets out as the notice period which must be worked) or statutory notice (the basic legal minimum).
Statutory notice is:
1 month to 2 years’ service – statutory notice is 1 week
2 to 12 years’ service – statutory notice is 1 week for each full year they have worked
12 years’ service or more – statutory notice is 12 weeks
It is assumed that the P&O staff will be paid in lieu of notice (sometimes known as PILON). This can only be done if there is a contractual provision which allows it. Otherwise, P&O will have breached the employees’ contract of employment.
Assuming the P&O staff are protected by UK employment legislation, it appears that P&O have breached a number of laws. The affected employees would be able to commence legal proceedings for unfair dismissal and failure to follow the collective consultation regulations.
However, this assumes the employees are covered by UK employment law.
When undertaking a redundancy exercise, it is essential that employers follow a full and proper procedure. This should include a thorough consultation process in an attempt to minimise the need for compulsory redundancies. This will help to protect the employer from legal claims for unfair dismissal and also the terrible publicity and reputational damage which can come about if the legal rules are not followed.
Should you wish to speak to one of rradar’s legal team about this, or any other employment matter, please call us.