News & Insights

P&O – That sinking feeling

After terminating nearly 800 employees with immediate effect, P&O has found itself the focus of a lot of media and political scrutiny, with even Prime Minister Boris Johnson weighing in to accuse it of breaking the law.

In order to dismiss fairly for redundancy under UK legislation, employers are required to follow a fair process. When an employer is proposing 20+ redundancies at one establishment within a 90-day period, it must consult both individually with affected staff and collectively with union or other employee representatives. That consultation must begin in good time and at least 30 days before the first dismissal takes effect, rising to 45 days beforehand when 100+ redundancies are proposed.

Based on press reports and the company’s own admissions, P&O has failed to comply with its collective consultation obligations and accordingly would be liable for ‘protective awards’ of up to 90 days’ gross pay per affected employee. This is on top of other sums it will owe, including statutory redundancy, payment in lieu of notice and accrued but untaken holiday.

Since the redundancies were publicised, P&O has announced that staff have been offered severance packages with an aggregate value of £36.5m, with some individuals set to receive over £100,000. Receipt of these enhanced sums will depend on the employees signing settlement agreements waiving their rights to bring unfair dismissal and other claims in an employment tribunal. While unions have denounced the settlement offers as ‘blackmail’, employees will have to receive independent legal advice before agreeing to any deal.

One of the more technical legal points arising out of the P&O scenario is whether the company was required to notify the Business Secretary, Kwasi Kwarteng, of the mass redundancies. Ordinarily, an employer proposing 100+ redundancies would have to provide this notification and do so at least 45 days before the first dismissal. This is a particularly important step, because failure to comply is punishable as a criminal offence and with an unlimited fine.

P&O has argued that because the employees concerned are crew members of ships registered at ports outside Great Britain, it was only required to notify the competent authorities of the states where the ships were registered (reportedly Cyprus, the Bahamas and Bermuda) and that it did so on 17 March. If the ships were indeed registered in these other countries then P&O’s position on who it had to notify looks correct, but the timing of the notifications will still leave it vulnerable to legal action.

In the face of waves of hostile coverage decrying its treatment of its staff, P&O has claimed that its business would not have survived without fundamental change to crewing arrangements and that its actions were only taken as a last resort. It has now engaged agency staff to perform roles previously carried out by employees.

While the issue of which state authority P&O had to notify is specific to the maritime sector and of limited wider application, the rest of this evolving story is a reminder to employers of the significant financial and reputational repercussions which may flow from a conscious decision to sidestep consultation obligations.

P&O has bargained that what it will lose in the short-term in public, customer and staff goodwill, not to mention the eye-watering settlement costs, will be recouped over time through a more streamlined resourcing model. For the vast majority of employers, adopting the same approach to their own redundancy or restructure plans would be highly unattractive and extremely unwise.