We should preface this article by stating that we don’t have all the facts or framework about this story, as they have not yet all been released to the media, but we can surmise from the information we have available.
Last week, the country was shocked to hear about the mass redundancies made by P&O, when the company sacked more than 800 of its workers on the spot. The ferry company said in a statement that it had been forced to decide between firing these employees or shutting the business down, but the move has been widely criticised: both for its lack of notice to employees and the replacement of staff by agency workers.
Certainly from a moral perspective, this has been an extremely questionable decision. But what about from a legal standpoint? What are the legal implications of these mass P&O redundancies, and might the company now be facing punishment by law?
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What is the legal perspective?
From an employment law perspective, this case has the appearance of constituting a number of breaches of legislation, which we’ll come to talk about in the next section. It does not appear to be a lawful process, as there are certain steps that need to be complied, with which appear not to have happened.
While UK law is designed to protect employees as much as possible, an employer may – on occasion – decide to weigh up the risks and ignore these requirements. Though it’s impossible to say whether this is the case here, it certainly looks likely.
What are the laws that employers should abide by?
Collective consultation:
The most immediately pressing and relevant law to this situation appears to be the rule around ‘collective consultation’. This is a duty that employers have if they are proposing to make 20 or more employees redundant within a 90 day period, where they must notify employees by providing notice of the proposed redundancies. If it’s 100 employees or more (which, in this case, it is), the consultation should happen at least 45 days in advance of the dismissals.
During this process, the employer should provide certain information about their plans for redundancies, in order to provide staff with enough forewarning; and talk to them to see if there are ways in which they can avoid these potential redundancies. This is a legal requirement under legislation: an employer is required to collectively consult with employees so they have the opportunity to provide feedback (usually via representative Trade Unions or elected representatives). This is the normal process, and clearly it’s not been followed in the P&O case.
There is a certain exemption to this rule, and this is called the ‘Special Circumstances’ exemption. This allows employers to dispense of the usual process if it’s not reasonably practical for them to follow it – in other words, if it’s virtually impossible for them to consult with their staff. However, this exemption is both limited and rarely applied, and doesn’t appear to be the case in this situation.
HR1 form:
The government has a duty to help employees facing redundancy. To do this, advance notification of potential redundancies is required from employers. Failure to comply with these statutory notification requirements, without good cause, may result in prosecution and a fine, on summary conviction, for the officers of the company.
If an employer is making more than 20 employees redundant within a 90 day period, then they are required to fill out an HR1 form. This notification is sent to the Insolvency Service, a government agency that supports those in financial distress, and aims to tackle financial wrongdoing.
On this form, it states that a copy of the notification must be sent to the representatives of the employees being consulted, and also that employers must make every effort to comply within the minimum notification period, as far as is reasonably practicable. If this is not done, the employer must give reasons as to why they could not provide the information on time.
Settlement Agreements
Sometimes, employers may make the decision not to comply with the law for commercial reasons. For example, they might not give employees notice that their employment will end because they think it might do damage to their business.
Instead, they’ll offer enhanced packages to the employees that are leaving or have been dismissed, known as Settlement Agreements. By signing a Settlement Agreement, the employee waives their right to bring claims to the Employment Tribunal. Usually, an employee chooses to do this because the employer offers a higher payment than what they would have been entitled to, after they had gone through a redundancy process and been dismissed.
TUPE
Another law that might be relevant in similar situations is the TUPE Regulations, as all of the P&O staff who were made redundant have been replaced by agency workers.
If another company comes in and takes over a contract, TUPE comes into effect. This is a specific piece of legislation that’s designed to protect employees if the business in which they are employed changes hands.
Its effect is to move employees and any liabilities associated with them from the old employer to the new employer by operation of law, with the employees retaining the same terms and conditions that applied before the transfer. Again, as we have seen, this process does not appear to have been followed in the P&O case.
What are the potential consequences for P&O?
As the above sections have highlighted, there are quite a few legal questions that have arisen from this case. There are justifiable concerns in relation to P&O’s notification of the dismissals, and the replacement of staff with agency workers.
Firstly, the Trade Unions are, quite rightly, arguing the fact that they’ve not had the opportunity to be consulted over these proposed redundancies, at least within the framework required for the HR1 form and collective consultation obligations.
The law states that if an employee has worked at a business for at least 2 years, they are protected from being unfairly dismissed. This means they will have the ability to bring a claim for unfair dismissal under employment law legislation. Employees with less than two years’ service can still bring claims for discrimination or whistleblowing if they are made redundant. With this in mind, P&O might find themselves facing an onslaught of unfair dismissal claims at an Employment Tribunal, if employees decide not to accept Settlement Agreements.
Furthermore, a failure to provide notification to the government on the HR1 form, can give rise to criminal sanctions against directors, which essentially means that individuals in charge could face criminal prosecution.
Is it the government that investigates, or is it up to the workers to claim?
When it comes to investigating and enforcing the claims against P&O, the government and the employees who have been made redundant may legally challenge what has happened. The Trade Unions (which, in the P&O case, is RMT) represent the majority of the affected individuals, and they could bring a claim to the Employment Tribunal on the employees’ behalf, for a failure to comply with the collective consultation legislation..
As P&O are owned by a company in Dubai – DP World – the challenge may lie in enforcing any claims, if it transpires that the employer is not technically based in the UK.
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All in all, it certainly looks as though P&O have breached a number of rules from an Employment Law standpoint. Legal issues aside, this will certainly cause substantial reputational damage for the company.
In advance of taking such extreme action, employers should always carefully consider the best way to effectively communicate with staff, at what is a very sensitive and challenging time. The importance of taking legal advice in such circumstances cannot be overstated.
If you need information about employment law and what this means for your business – particularly if you are planning on redundancies or restructuring – get in touch with our employment solicitors for a chat today.
