P&O Ferries sacking: what are the implications of breaking employment law?

Holly Cudbill provided commentary on television’s BBC News at One and Sky News that day and you can read her comment in the BBC’s original article here.

Since then there has been shock and outrage, as well as Transport Secretary Grant Shapps calling for the resignation of P&O boss Peter Hebblethwaite after he admitted to a committee of MPs that the dismissals broke UK employment law.

On 28 March, Mr Shapps wrote to P&O and demanded that it immediately offer all the workers their jobs back, threatening a review of Government contracts with the company and a further review by the Insolvency Service. Mr Shapps also mentioned an intention to introduce a “package” of laws which would, he said, prevent the law being broken and anything less than the standard National Minimum Wage (NMW) being paid to seafarers. The letter also called for P&O to drop its deadline of 31 March 2022 for workers to sign severance agreements. The following day P&O rejected this course of action.

As we predicted when we first wrote this article on 29 March, the Government has faced difficulties both in terms of the “package” the Government proposed and the way that P&O responded.

The main issues which prevented any change to “reverse” the situation are:

• P&O were reported to be offering generous severance terms which in most cases could have been more than an individual would get at an Employment Tribunal in notice pay, unfair dismissal compensation and “protective awards”, or for a complete failure to collectively consult over redundancies.
• The press reported that all but one of the workers accepted these severance terms. It is understandable that many would accept a generous severance package if the alternative is potentially a very long wait for an Employment Tribunal hearing.
• Having already taken this drastic action, it was always unlikely that P&O would want to reinstate workers (some of whom would have accrued many years of service), even if it were on a lower wage such as the NMW. If workers were previously paid more than the NMW, they (and trade unions) would be reluctant to accept reduced terms and conditions. It was much more likely, if forced by new laws to pay at least the NMW, that P&O would engage new staff (as they did, although they then faced the difficulties of many of them not being properly trained and health and safety issues).
• As predicted in our original article, there are a number of difficulties in introducing NMW laws which are enforceable in circumstances where a ship is registered outside of the UK and workers might be deemed to be engaged in another jurisdiction. The Government has attempted to make the very limited amendments it can by announcing the Harbours (Seafarers’ Remuneration) Bill – see further details in our article on The Queen’s Speech – implications for Employment law. Out of nine Government proposals announced in response to P&O’s actions, this is perhaps one of the only changes which could make a small difference.
• As mentioned in our original article, it was thought that because P&O’s ships were registered elsewhere, they were not required to submit form HR1 to the UK Government and Insolvency service ahead of the redundancies. The Government commissioned the Insolvency Service to look into this, perhaps hoping that there was some action it could take. This aspect was important because, unlike potential employment tribunal claims, which can be settled financially with individuals by means of the settlement agreements of the kind offered by P&O, the failure to submit an HR1 carries criminal sanctions for the directors involved. However, as suspected, P&O’s ships were not registered in the UK, and the criminal penalty did not therefore apply. Whilst there is a duty under UK law to notify the competent authority of the state where the ship is registered, failure to do so does not carry criminal penalties and effectively has no “teeth”.
• Apart from the Harbours (Seafarers’ Remuneration) Bill, the other main proposal which could make a difference (although not to a P&O scenario, since they did not rehire them) is a financial penalty on employers that “fire and rehire” staff. This remains controversial, since the Government had already announced both last year and earlier this year that it would not be legislating in this area and instead asked ACAS to produce non-binding Guidance. The Government has now said it is committed to producing a statutory code of practice which will see an uplift in compensation if it is not followed, although this is not mentioned in the Queen’s Speech briefing papers. Other changes to the law on collective consultation prior to dismissals, including any new criminal penalties, have not been proposed.
• If the one employee who did not take the severance package (reportedly seeking an extremely ambitious £76 million in compensation) succeeds in an Employment Tribunal claim, it is possible that P&O could also be ordered to pay an additional penalty to the Secretary of State if it is deemed to have breached workers’ rights and the breach has “aggravating features”. This was introduced in 2014 and has been used very sparingly, but in circumstances like this a Tribunal could consider such an additional penalty.

Ultimately, it seems that despite some of the robust talk from the Government in the light of P&O’s actions, the “package of measures” to “prevent” employers breaking the law in this way may have a very limited effect.

If you have any questions on the implications of the PO Ferries sacking, please contact a one of our employment lawyers.