What should P&O have done?

The news that P&O Ferries has decided to sack 800 employees and replace them with agency staff has been met with widespread criticism.
 
As all employers know, businesses must constantly evolve their workforce to meet their business needs, improve productivity or respond to changes in their industry or the wider economy. In some cases, this can lead to the need to make redundancies or restructure the business.
 
However, UK employment law requires employers to follow fair redundancy procedures, including a period of information and consultation and consideration of alternatives, before any decision to make redundancies is made.
 
What did P&O do?
 
P&O has been roundly criticized following reports that it made around 800 employees redundant, with immediate effect and without consultation, during a company-wide video call.
 
Much of the outcry stems from the shock felt by employees, unions and onlookers alike that such a large employer would apparently fail to follow even the most minimal of consultation processes.
 
So what should P&O have done?
 
P&O’s situation is one commonly referred to as a “collective redundancy” scenario. Briefly, this is where an employer proposes to dismiss as a redundant 20 or more employees at one establishment within any period of 90 days or less. In such circumstances minimum consultation periods will apply.
 
P&O proposed to dismiss 100 or more employees (in fact around 800 employees, according to reports), meaning that a consultation period should have commenced at least 45 days before any dismissals took effect. This minimum period is reduced to 30 days where an employer proposes to dismiss between 20 and 99 employees.
 
P&O should have provided representatives of the potentially redundant employees with key information about the redundancy in order to enable meaningful consultation to take place. This information should have included the reasons for the redundancy proposals, the number and description of employees it proposed to make redundant and how they would be selected.
 
Following the provision of this information, meaningful consultation should have taken place at a formative stage (i.e. before the decision had been made) and this should have included discussing ways of avoiding the redundancies, reducing the number of employees who needed to be made redundant and mitigating the consequences of redundancy.
 
From the reporting on the P&O situation, it appears that this consultation may not have taken place.
 
What are the consequences for P&O and will they be concerned?
 
A fair redundancy processes should balance the needs of the business with the rights of employees and failure to properly consult with employees, or follow the correct procedures, can lead to costly Employment Tribunal claims, including for a “protective award” for failure to inform and consult, as well as an ordinary unfair dismissal claim.
 
P&O’s potential liabilities may therefore be up to 90 days’ pay for each of the 800 affected employees, plus any losses of earnings flowing from each employees’ unfair dismissal (subject to the statutory cap compensatory awards, which is currently £89,493).
 
P&O may also be subject to criminal proceedings, both as a company and in respect of its directors in their personal capacities, if there was a failure to notify the Secretary of State of the redundancy proposals at least 45 days before any dismissals take effect. There is no limit on the fine which can be issued on conviction in such cases.
 
It seems unlikely that P&O was not aware of its legal position or the consequences of breaching the collective consultation requirements. More likely, P&O factored these risks into its decision and reached the conclusion that they are outweighed by the commercial benefits it feels the decision will bring. It is also possible that P&O has taken steps to mitigate the risks as far as possible, for example by offering enhanced redundancy terms in return for entering into a settlement agreement.
 
Assumptions made in this blog
 
This blog is for general purposes only and should not be relied upon as legal advice. This blog assumes that the P&O employees have the full benefit of UK employment law, as UK based employees working for a UK connected company. This may not necessarily be the case, however, as explored by leading employment law barrister Grahame Anderson in this Twitter thread. It also assumes that a sufficient number of employees were employed in “one establishment”, such that the collective consultation obligations applied, which may also not necessarily be the case.
 
Get in touch
 
Please don’t hesitate to contact the Employment Team at MLP Law if you would like any advice on collective redundancy situations. You can always reach us at employment@mlplaw.co.uk or @HRHeroUK or on 0161 926 9969.