P&O in Hot Water: Sackings provoke threats of legal action as well as legislative proposals

April 7, 2022

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4 min read

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What's going on here?

Ministers have asked the Insolvency Service to investigate whether P&O Ferries breached employment law by sacking 800 staff without notice or consultation.

What does this mean?

P&O’s decision to sack 800 seafarers by video call and replace them with cheaper agency workers sparked widespread outrage. But it also may have breached two of the company’s employment law obligations. 

Firstly, a company making 20 or more staff redundant within 90 days must first run a consultation with their trade union. Secondly, if a company is making 100 or more staff redundant, it must also notify the business secretary in writing both before giving notice to the employees, and at least 45 days before the dismissals. Thompsons Solicitors, the firm advising the Rail, Maritime and Transport Union (RMT), said that P&O had shown a “shocking disregard of the most basic employment law” by failing to comply with either of these obligations. 

The company has admitted to breaching the consultation requirement, and the RMT is advising workers not to sign the severance agreements while it considers legal action. But workers would gain little from a successful unfair dismissal claim. As compensation for the lack of notice, P&O have offered workers “enhanced severance packages”, which exceed, or at least match, the award they would receive if they won in the employment tribunal. Some crew members have been offered as much as £170,000.

Breach of the obligation to notify the business secretary, however, is a criminal offence punishable by an unlimited fine. The Labour party has called on the Government to commence criminal proceedings against P&O and its directors. However, maritime lawyers say that a 2018 amendment removed the notification requirement for mass redundancies in ships registered overseas. The ships were registered in Cyprus and the Bahamas.

The company, which is represented by Pinsent Masons, justified the dismissals as necessary to “secure the future of our business”. After being acquired by Dubai-based DP World in 2019, P&O has recorded yearly losses of £100m. 

On Monday, Grant Shapps, the Transport Secretary, gave P&O “one further opportunity” to rehire the staff before the Government forced the company to do so.

What's the big picture effect?

P&O’s services will only restart when the vessels staffed by agency workers are approved as seaworthy by government officials. With P&O responsible for around a third of the cross-Channel ferry market, the cancellations have proved “just another stick in the eye for British supply chains”, according to one shipping agent. There is also potential for chaos in the Easter holidays, during which P&O carries around 10,000 passengers a day from Dover. All of this could benefit P&O’s rivals. DFDS, one of Europe’s biggest shipping companies, is reportedly being lined up to fill the potential void. Stena Line, meanwhile, has put extra ferries between Scotland and Northern Ireland to enable retailers to resupply, including Asda and M&S.

The reputational damage P&O has suffered may prove costly. Shapps has raised the prospect of a consumer and industry boycott and said he would review all government contracts with P&O and DP World. There are also questions as to whether DP World’s London Gateway and Southampton ports should still benefit from the Government’s freeport scheme, with each site set to receive £25m of taxpayer support. Pressure is mounting on the Government to make an example of P&O, especially given its insistence that Brexit would mean higher wages and the end of “cheap foreign labour”. 

The gap in the law permitting those agency workers to be paid an average of ÂŁ5.50 an hour looks set to be filled. In 2020, the Government extended the statutory minimum wage to all seafarers working on domestic routes but excluded ferries operating between the UK and the rest of Europe, amid concerns by North Sea operators that their services would not be viable with higher costs. The Government has now committed to forcing all ferry companies operating out of UK ports to pay the national minimum wage – a move which P&O may struggle to survive from.

More broadly, the episode raises questions as to whether UK employment protections are too weak. According to RMT’s national secretary, P&O retained staff employed under Dutch and French contracts because those jurisdictions offer stronger protections. Alan Bogg, professor of labour law at the University of Bristol, said that the ability of large, well-resourced employers like P&O to deliberately flout the law has exposed the weakness of the UK’s labour market enforcement regime. The Trade Union Congress has called on the Government to bring forward a bill strengthening workplace protections against unfair dismissal and introducing tough penalties for employers who breach them. Its general secretary said that the “national scandal” must be a “turning point for workers’ rights in the UK”.

Report written by Oliver Hutton

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