P & O Ferries – A Cautionary Note for Employers
P & O Ferries hit the headlines in March this year when they announced the redundancies of nearly 800 workers by pre-recorded video message. The company had broken the law by failing to consult with either the trade unions or their workers about their intentions. It has been suggested that P & O chose not to do so because they knew no union could accept their decision and that there was therefore little point when the redundancies were ‘inevitable’ in any event.
Collective consultaion law
Where an employer is planning on making 20 or more employees redundant within a period of 90 days or less, they need to commence a period of ‘collective consultation’ with the employee’s representatives (either trade unions or elected employees).
These consultations must refer to the following:
- Ways to avoid the ‘potential’ redundancies;
- The business rationale for the ‘potential’ redundancies;
- How to keep the number of dismissals to a minimum; and
- How to limit the effects for employees selected, for example by offering retraining or considering any suitable alternative roles.
The time frames for the period of consultation are determined by the number of employees at risk of redundancy.
These are as follows:
- For between 20 to 99 redundancies, the consultation must start at least 30 days before any dismissals take effect.
- For 100 or more redundancies, the consultation must start at least 45 days before any dismissals take effect.
Because employers need to be mindful of an employee’s potential claim for unfair dismissal, they must ensure not only that they have a fair reason for dismissal, but also that they have followed a fair process and engaged in ‘meaningful’ consultation.
Employer redundancy risks
There are several consequences for an employer that does not follow a fair redundancy process or engage in meaningful consultation:
There are significant costs should an employer breach employment law in relation to collective consultation and unfair dismissal.
If an employer fails to commence consultation with the employee’s representatives,
(1) In good time before making the decision to dismiss; and
(2) at least 30/45 days before the dismissal takes effect, then the employer will be liable for a protective award of up to 90 days’ full pay per affected employee.
In cases of unfair dismissal, employees can also claim a basic award (unless they’ve already received the statutory redundancy payment) and a compensatory award (capped at the lower of either one year’s gross pay or, at the time of the P & O dismissals, £89, 493).
An employer should therefore evaluate whether they can afford to pay a large number of tribunal awards and associated legal costs should the claims succeed, not forgetting the inevitable business disruption that any litigation would create.
P & O reportedly offered their employees very generous settlement offers totalling around £36.5 million to avoid the inevitable Tribunal claims that would follow. Any employer considering following P & O’s example would therefore need very deep pockets to satisfy any legal claims.
The action or inaction of P & O Ferries caused them significant reputational damage as their behaviour featured regularly in various media outlets and in Parliament for a significant period of time. It will be interesting to see the long-term commercial impact this will have on their business to gauge whether or not it was worth it.
Employers are obliged to notify the Department of Business, Energy and Industrial Strategy (BEIS) that they are proposing to make 20 or more employees redundant in one establishment in Great Britain within a 90 – day period. This must be done before notice of termination is given and at least 30 days before any dismissal takes effect (or 45 days where 100 or more employees are expected to be made redundant).
Failure to notify BEIS in the prescribed timeframe is a criminal offence leaving the employer liable on summary conviction to a fine, which can be unlimited.
Directors can also be prosecuted if the offence is committed with their consent or connivance or due to neglect on their part.
In P & O’s case, as their ships were not registered in the UK, they have argued that the duty to notify and therefore the criminal penalty does not apply to them, a handy if morally dubious loophole.
Whilst it appears on the facts, that P & O may have got away with it, they have had to pay a heavy price financially and reputationally and employers should be very wary of following their example.