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What did P&O get wrong?

In this month’s hot topic, we examine the actions of P&O Ferries which led to public outcry at the time and consider what they should have done instead in line with UK employment law. P&O Ferries became a case study on how not to manage redundancy dismissals, following the way in which they dismissed 786 employees back in March 2022.

Jurisdictional requirements

When P&O wrote to the Secretary of State for Business, Energy, and Industrial Strategy on 22 March to confirm the action taken, they advised that all employees dismissed belonged to the Jersey-based subsidiary of P&O and were not all UK residents.

P&O Ferries does not fall within the remit of UK employment law, as it falls under the jurisdiction of maritime laws. However, the Employment Rights Act 1996 does specify that in certain circumstances, mariners can claim unfair dismissal. Specifically, section 199, 7a-c states:

Workers onboard a ship have protection from unfair dismissal if the ship’s entry in the register specifies a port in Great Britain as the port to which the vessel is to be treated as belonging
Under his contract of employment, the person employed does not work wholly outside Great Britain and the person employed is ordinarily resident in Great Britain (section 199, 7 a, b and c).

This case study is unique and technical given the various jurisdictions involved, however, we do know of one employment tribunal claim lodged in the UK, under UK employment law. Therefore for the purpose of this hot topic, we will look at the steps they took and how it aligns to UK employment law only.

Regardless though of which jurisdiction applies, the public outcry on how the company treated its employees demonstrates how badly this will have seriously damaged the company’s public reputation.

What happened

On 17 March 2022, P&O Ferries announced to 786 employees, via a pre-recorded video call, that they would be made redundant with immediate effect. They announced that the business would adopt a new operating model using agency workers. There was no consultation.

The company paid all 786 employees a settlement pay-off payment then recruited agency staff to replace the employees but paying under the UK national minimum wage.

Consequently, it led to a public outcry, not just from government ministers and MPs, but from Trade Unions, P&O customers, past and future, and from employees themselves. With reports that some employees refused to disembark ferries.

What further materialised, is that the CEO, Mr. Peter Hebblethwaite, when called to answer questions by the Commons Select Transport Committee, admitted that the way in which the company handled it was intentional.

With news being available more or less instantly because of social media, this became a massive story very quickly damaging the company’s reputation. Not only this, but the company and its actions were the subject of written questions tabled in parliament, debates in the House of Commons and the subject of PMQ’s.

The company was also called to an evidence session of the Commons Transport Committee which involved witnesses.

Mr. Peter Hebblethwaite, the CEO of P&O Ferries, confirmed to the Transport Committee & Business Energy and Industrial Strategy Committee on the 24 March 2022 that the reason behind their actions of the 17 March was because of the company having lost an unsustainable amount of money and that the business would have had to have closed had they not taken the decision they took.

Whilst Mr. Hebblethwaite said that all options had been considered including taking the action of consulting first before dismissing, the company concluded that all of the other options would have resulted in closure of the company. Adding, that no union would have accepted their proposal to move to an operating model which used agency workers.

On 1 April 2022, the Insolvency Service confirmed that it was opening a civil and criminal investigation into P&O Ferries for its handling of the redundancies.

P&O Ferries Tribunal Claim

As indicated previously, we know of one employment tribunal claim that has been lodged in the UK under UK employment legislation.

John Lansdown argues in his tribunal claim that he was treated unfavourably as he is British and eligible for the national living wage and that the redundancy was a ‘sham’ given that his job was still needed, and no fair selection process had taken place.

Redundancy dismissal

The legal definition of redundancy as set out in the Employment Rights Act 1996, is that an employee is dismissed by reason of redundancy if the dismissal is wholly or attributable to the fact that:

  • The employer ceases to carry on the business in which the employee was employed
  • The employer ceases to carry on that business in the place where the employee was employed
  • The needs of the business for employees to carry out work of a particular kind cease or diminish or
  • The needs of the business for employees to carry out work of a particular kind in the place where the employee was employed cease or diminish.

A redundancy dismissal is a statutory fair reason for dismissal, however, as with all forms of dismissals, it must be fair.

The test of whether the dismissal was fair is determined by considering whether the employer’s decision falls within the band of reasonable responses. You can read more about what makes a fair dismissal, in last month’s Hot Topic and you can watch on demand the accompanying webinar.

Consultation

Where it is proposed that 20 or more employees are to be made redundant over a period of 90 days or less, employers must formally consult with those employees likely to be affected BEFORE any final decisions are made. This is in accordance with section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992.

Consultation must take place with union representatives (where a union is recognised) or with elected employee representatives where a union is not recognised. During the consultation period, consideration should be given by both parties to finding ways to avoid or reduce the number of redundancies by identifying possible alternatives for the individuals affected. The aim of the consultation is to reach agreement with representatives as far as possible.

Redundancy pay

Legally, employees who are made redundant and who have two years’ service at the date of dismissal, have a statutory entitlement to redundancy pay. Redundancy pay is not payable when an employee has under two year’s service. They would only be entitled to any notice pay, should payment in lieu of notice be made.

For P&O Ferries, they gave their employees a financial settlement to compensate them for having the employment terminated, which exceeded what they would have received as a statutory payment.

The financial settlements were significant amounting to more than £36 million, and reportedly, around 40 employees received payments exceeding £100,000. Nobody received less than £15,000.

Claims

How P&O Ferries have handled this matter provides a good case study of how not to carry out redundancy dismissals, here is a summary of why, and the risks for employers:

Unfair dismissal – is it a genuine redundancy? The circumstances in this case do not line up to the legal definition of what constitutes a redundancy situation.  Dismissing for redundancy, where there is not a genuine redundancy situation could constitute an unfair dismissal.
Wrongful dismissal – failure to give adequate notice When an employee is dismissed which breaches their contractual right (so in this case, not being served notice), it can lead to claims of wrongful dismissal.
Failure to consult A failure to fully consult as is required under the Trade Union and Labour Relations (Consolidation) Act 1992 can result in a financial penalty of up to 13 weeks’ pay.
Automatic unfair dismissal Should the circumstances suggest it was a TUPE situation then the dismissal could be treated as automatically unfair.

Further Information

If you would like HR, Payroll, or Health & safety support, please contact us or get in touch with us on 0844 324, 5840 and speak to a member of the team.

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