UK ministers have asked the government’s Insolvency Service to investigate whether P&O Ferries breached employment law by firing 800 UK-based sailors and replacing them with agency staff.
Peter Hebblethwaite, chief executive of P&O Ferries, said in a letter to remaining employees seen by the Financial Times that the radical decision was taken “to reduce our crewing costs by 50 per cent, secure the future of our business and set it up for growth”.
But in a separate letter to P&O Ferries on Friday, business secretary Kwasi Kwarteng said the company appeared not to have followed the proper legal process and that he had asked the Insolvency Service to investigate. In the meantime, he asked the company to explain “why you think these rules do not apply to you”.
Are P&O’s actions legal?
Nautilus International, a trade union for British, Dutch and Swiss seafarers, said it believed P&O had acted illegally by failing to launch a consultation process before making the redundancies or to notify the business secretary.
Alan Bogg, professor of labour law at Bristol university, said P&O’s action appeared to be a “clear breach” of its obligations under collective redundancy law.
A company making 20 or more staff redundant within 90 days is required by UK law to run a consultation before dismissing the staff. Eight hundred P&O crew were told on Thursday their employment would end that evening. A company dismissing more than 100 people must also notify the business secretary in writing of the proposed redundancies before it gives notice to the employees that their contracts will be terminated, and at least 45 days before the dismissals begin.
P&O declined to comment on whether it had complied with its legal obligations.
The workers dismissed on Thursday were employed by a hiring agency in Jersey. But Nautilus claimed their jobs still fell under UK-based law and protections since it was the jurisdiction specified in their contracts.
Does it matter that P&O is paying compensation?
Hebblethwaite told staff on Thursday that the company would be giving “enhanced severance packages” to redundant employees to compensate them for lack of notice.
Neil Todd, a partner at Thompsons Solicitors, which is advising the RMT union, said P&O was effectively “buying out its obligations under UK law” by offering staff 13 weeks pay on top of a redundancy package — equivalent to the penalty it would have to pay if an employment tribunal found it had breached the requirement to hold a collective consultation.
In an “extreme scenario, like the company’s going bust or . . . some crisis which could not have been foreseen” an employer might have a defence for failing to use the proper process, said Richard Fox, employment law partner at Kingsley Napley.
But firing people to replace them with cheaper agency workers “doesn’t sound to me like the kind of emergency situation that the tribunal would be looking for”, he said. “My guess is they priced in what’s the worst that can happen and then just offered that payment.”
Could this end up in the courts?
It was possible that trade unions would seek an injunction to force P&O to consult workers, said employment barrister Alex Mellis.
Darren Procter, RMT national secretary, said the union was advising workers not to sign severance agreements yet while it considered legal action.
However, winning an unfair dismissal claim would achieve little for workers, given they had been offered enhanced redundancy terms, said Nautilus.
Jo Mackie, head of employment law at Slater and Gordon, which is representing Nautilus, said that there could be value in making an example of P&O by taking it to court.
P&O could also face separate action by the government if it was found to have failed to notify it properly about the redundancy plans. Failure to do so is a criminal offence for which both a company and its directors or managers can be prosecuted. Kwarteng said in his letter to P&O that a breach could result in an unlimited fine.
Is UK employment protection strong enough?
P&O retained staff employed under Dutch and French contracts because these countries’ employment law protections were stronger than those of the UK, said Procter at the RMT.
The company’s action exposed the weakness of the UK’s labour market enforcement regime, given “a situation where you have very large, well-resourced employers that make decisions to deliberately flout the law”, said Bogg at Bristol university.
The Trades Union Congress called on the government to urgently bring forward an employment bill to strengthen workplace protections and impose strong penalties on employers who break the law.
“What happened at P&O is a national scandal — it can’t ever be allowed to happen again,” said Frances O’Grady, general secretary of the TUC. “This must be a turning point for workers’ rights in the UK.”
Michael O’Dwyer, Harry Dempsey and Delphine Strauss in London and Ian Johnston in Dover with additional reporting by Peter Foster