Collective redundancies: key takeaways for employers after the P&O affair

The negative press, public outrage and ongoing fall-out from P&O’s decision to dismiss 800 employees without prior notice or any consultation makes it nothing short of a PR disaster. 

In this article we look at the key takeaways for UK employers following the P&O affair, as well as the potential implications for the UK’s protection of the legal rights of employees.

Background

P&O’s actions are a relatively rare occurrence in UK industrial relations: the Trade Union & Labour Relations (Consolidation) Act 1992 (TULRCA) places UK employers under an obligation to collectively consult with the representatives of affected employees where there is a proposal to make 20 or more employees redundant within 90 days or less at one establishment.

There is also a separate obligation to notify the Secretary of State of the proposed redundancies within a specified timeframe. A failure to do so attracts financial and criminal penalties.

It has become clear, following the evidence given by P&O’s Chief Executive to the BEIS and Transport Select Committee, that the affected P&O employees are employed under Jersey-based employment contracts and each affected ship is registered outside of the UK.

While P&O apparently notified the authorities in the jurisdictions where the ships are registered, it did not consider itself legally obliged to follow the UK notification process due to a maritime exception in TULRCA.

In declining to consult with the representatives of affected employees, P&O has taken a much-criticised stance, effectively arguing that the commercial reality of the company’s annual losses was more important than complying with any legal obligation owed to employees.  

The opprobrium generated by P&O’s actions will prove instructive to other employers looking at following suit.

Key takeaways:

• Communication is key: Surprising employees with the news of their immediate dismissal is highly unlikely to achieve any kind of positive result. The element of shock will no doubt have left P&O employees reeling. They may also have felt less able to engage with any subsequent information provided by the business, such as in relation to exit packages (reported to be over £100,000 for some senior officers) or the possibility of working through the new crew supplier company. The risk of employees remaining disgruntled for some time to come is also much greater when they feel blindsided, with an inevitable increase in potential employment claims.
  
  A carefully worded, sensitive explanation of the commercial necessity behind proposed redundancies is the most advisable starting point for a redundancy I&C process. As things progress, additional clear communication of any steps the employer is taking to mitigate the impact of the redundancies (such as enhanced payments, outplacement support, or reassignment opportunities) will also put employers in a better position. Good employment practice involves engaging employees in the process so that they feel like their contribution is important, even if there is no change in the eventual end result.

• Money talks – the cost of getting things wrong: A failure to comply with the collective redundancy I&C process can be expensive for employers, with a protective award from the tribunal of up to 90 days’ gross uncapped pay per employee on the cards.
  
  At an individual level, each redundant employee is also entitled to receive contractual notice (or payment in lieu); a statutory redundancy payment (for those with two years’ service); and a potential compensatory award for unfair dismissal where the employer fails to follow a fair process.
  
  The business case and management strategy behind any cost-cutting exercise should always take account of the key legal risks on the table. In many cases there is an obvious financial incentive for employers to do things by the book and avoid the negative financial fallout of employment claims.

• Carefully consider the consequences: It is not uncommon for some employers to try and wrap up a collective redundancy process in a shorter period than legally required, with the offer of a financial package in exchange for settlement of employee claims. This may be because of an immediate need to cut overheads, or a lack of management desire to fully engage with the I&C process. P&O have stated that they considered there to be no other option and that no trade union would have agreed to the scale of the proposed changes, which ignores the purpose of the employee protection offered by TULRCA.
  
  This step should not be taken lightly by UK employers, particularly given the universal condemnation of P&O’s actions. What was once a balancing exercise between legal risk and commercial imperative now involves consideration of much wider issues.
  
  The damage to P&O’s brand and reputation could impact on its future ability to recruit, customer loyalty, and the prospect of securing commercial contracts.
  
  It also does not reflect general market expectations of how employers should treat their staff in today’s climate. The morale of the remaining workforce will have taken a severe dent in the face of such employer bad behaviour and employee relations may take years to recover. Employers are best advised to treat P&O’s actions as a lesson in how not to carry out a redundancy process.

What lies ahead for the protection of employee rights?

The Government intends to address the fallout of P&O’s actions by introducing draft legislation later this week requiring ferry companies operating from UK ports to pay crew at least the UK national minimum wage, even where ships are registered overseas. This is aimed at removing the financial incentive for employers to dismiss higher paid employees and replace them with the cheaper alternative of agency crew, who can currently be paid less than minimum wage. 

This legislative change may come too late for the 800 affected P&O employees. Ultimately, UK employers may face hefty financial consequences for their illegal actions in relation to employees, but they cannot currently be forced to reinstate staff if they choose not to do so. However, it would seem the UK Government has a renewed interest in protecting employee rights, given its willingness to react so quickly to the P&O public outrage. That said, a move to render “fire and rehire” practices illegal (see our recent article) has apparently been ruled out.

The Taylor Review in 2017 first highlighted the need to reform vulnerable worker protection, culminating among other things in confirmation that a new “Workers’ Watchdog” is set to be created, to enhance state enforcement of basic employment rights (see our previous article here).

However, details of the new Watchdog are yet to materialise and – according to the Government – will only do so when parliamentary time allows. The current political climate, not to mention an insecure employment market and looming cost of living crisis, may well bring renewed focus on creating a more effective enforcement process for employee rights, with P&O’s actions acting as a further catalyst. It is possible that the Government will also look at whether the original remit of the proposed Workers’ Watchdog goes far enough, or whether it should be further expanded, such as to cover discrimination and other breaches of the Equality Act.