In this article, 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 for P&O Ferries Redundancies
When P&O Ferries wrote to the Secretary of State for Business, Energy, and Industrial Strategy on 22 March 2022 to confirm their actions, they advised that all dismissed employees belonged to the Jersey-based subsidiary of P&O and were not all UK residents.
While P&O Ferries does not entirely fall under the remit of UK employment law, as it falls under maritime laws, the Employment Rights Act 1996 specifies that mariners can claim unfair dismissal under certain conditions. According to section 199, 7a-c:
- 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 ship’s home port.
- The employee does not work wholly outside of Great Britain.
- The employee is ordinarily resident in Great Britain.
This case study is unique given the various jurisdictions involved, but we know of at least one employment tribunal claim lodged in the UK under UK employment law. Therefore, we will focus on the steps P&O Ferries took and how it aligns with UK employment law.
Regardless of which jurisdiction applies, the public outcry over how P&O treated its employees has caused serious reputational damage to the company.
P&O Ferries Redundancy Case Overview
On 17 March 2022, P&O Ferries announced via a pre-recorded video that 786 employees would be made redundant with immediate effect. They planned to replace these workers with agency staff, offering pay below the UK’s national minimum wage, and there was no prior consultation with employees or unions.
P&O Ferries paid the employees a settlement but faced major backlash from trade unions, government officials, and customers. Some employees refused to leave the ferries, escalating the controversy.
When the CEO, Peter Hebblethwaite, appeared before the Commons Select Transport Committee, he admitted that the decision not to consult employees was intentional. P&O made headlines due to the company’s justification that it was the only option to keep the business afloat, claiming that the company had lost unsustainable amounts of money.
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 and Employment Law Violations
We know of one employment tribunal claim 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.
He reports that he was forced to leave his belongings behind when he was notified unexpectedly that he had been made redundant. Security staff were carrying handcuffs and wearing balaclavas to remove staff who refused to leave. His claim therefore cites harassment in the way his dismissal was handled. He believes that P&O Ferries violated his dignity and created an intimidating, hostile and degrading, humiliating environment.
UK Employment Law on Redundancy Dismissals
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 or 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.
We know from the tribunal claim of John Lansdown that he argues the redundancy was a ‘sham’. UK legal commentators have also indicated that it was not a genuine redundancy dismissal in light of the fact that the roles remained and it was just different people carrying them out.
It is vital, for ensuring a fair dismissal, that the grounds on which an employee is dismissed are correct, otherwise it can lead to an unfair dismissal ruling. There are five potentially fair reasons to dismiss, which is the first hurdle to evidence when defending the dismissal was fair. These are:
- Conduct
- Capability
- Redundancy
- Statutory illegality of breach of a statutory restriction
- Some other substantial reason
Consultation Obligations Under UK Redundancy Law
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.
Whilst there is no legal obligation to consult where less than 20 employees may be made redundant, the employer still has a duty to act fairly and reasonably in handling redundancies and to inform and consult affected employees individually. Failure to do so could result in claims for unfair dismissal as well as a penalty of up to 13 weeks’ pay.
In P&O’s case they failed to consult which would amount to an unfair dismissal in UK law, and an award made would be the basic award, compensatory award as well as an award to compensate for a failure to consult.
Redundancy Pay for P&O Ferries Workers
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.
This was a commercial decision taken by the company, knowing that what they did was unlawful, but were prepared to pay significant compensation exceeding the statutory minimum to avoid claims.
At the time, a spokesperson for P&O Ferries confirmed that they would be paying 2.5 weeks of uncapped salary for each year employed instead of the statutory minimum, which is a maximum of 1.5 weeks for each year worked, but capped at £571 per week. The company also gave 13 weeks’ pay in lieu of notice for the notice that was not served, and a further 13 weeks’ pay for failing to consult.
Notification of authorities
Another requirement under the Trade Union and Labour Relations (Consolidation) Act 1992 is that the employers must notify the Secretary of State in writing (using form HR1), 45 days in advance of the first proposed dismissal, when proposing to dismiss 100 or more employees. Failure to do so, is a criminal offence.
For P&O specifically, there has been legal debate as to whether they fully adhered to this legal obligation, because back in 2018, changes were made to legislation regarding seafarers on vessels registered overseas (The Seafarers (Transnational Information and Consultation, Collective Redundancies and Insolvency Miscellaneous Amendments) Regulations 2018). The changes meant that the duty to inform the Statutory of State, transferred to notifying the overseas authorities. The legal debate is because it is unclear whether it being a criminal offence also transfers over.
Minimum Wage Violations and Agency Workers
The national minimum wage applies as far as those who work on offshore sites in the UK’s territorial waters or on its continental shelf. It also applies to all seafarers on vessels which service UK domestic routes and on UK registered vessels in UK and non-UK waters (as long as they are ordinarily resident in the UK).
The national minimum wage at this time was £9.50 per hour for adults aged 23 and over, and those aged between 21 and 22, it is £9.18 (there are other rates too for young workers and apprentices).
Unfortunately, the agency workers which P&O recruited to replace the 786 employees were only paid an hourly rate of £5.15 per hour, significantly less. P&O Ferries are able to do so because of the current national minimum rules. The UK Government have therefore announced plans for new legislation to allow ports to refuse access to ferries that do not pay their crew the national minimum wage.
TUPE?
There has been legal commentary as to whether the circumstances in the P&O Ferries case may have amounted to a TUPE situation. TUPE (The Transfer of Undertakings Protection of Employment Regulations) protect employees when they are transferred to a new employer. This protection includes protection from dismissal or suffering a detriment following changes to their contractual terms. TUPE can apply in several situations, one of which is when there is a change in service provision. Legal commentary have suggested that if P&O Ferries are outsourcing the roles to a contractor there is the argument that the dismissed employees should have been transferred over.
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. |
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