P&O – BPE Solicitors look at how the media and government got it wrong

Promotional Business Feature: BPE Solicitors - Pictured, Steve Conlay, Associate in the Employment team
Steve Conlay 10-21

In this article Steve Conlay considers the recent P&O dismissals, the “fire and rehire” culture in the UK and how the media and government continues to misinterpret the entire situation

The sudden sacking of 800 UK P&O workers on Thursday 17 March 2022 stunned many throughout the UK. How could a company simply dismiss individuals with immediate effect without any form of consultation or negotiations with unions?

The calls from all sides were unanimous. The Prime Minister stated that P&O’s actions had “broken the law”, the unions called out the actions as “shameful” and the media highlighted the hire & fire culture that the “conservatives failed to ban” as “abhorrent”. But is any of that actually true? Did P&O break the law, were the dismissals a result of the hire and fire culture and was the move by P&O “shameful”? Spoiler alert… it was shameful.

What rights did P&O employees have?

Right to be consulted

First let’s look at the right to be consulted. Where an employer in the UK plans on making 100 or more redundancies at a single establishment within a 90-day period, a period of collective consultation lasting at least 45 days must take place before the first dismissal.

It is clear from reports that no consultation was carried out with the individuals or unions prior to the dismissals taking effect. The individuals were as surprised to hear the news as we were when the media started breaking the story. In such circumstances, compensation available to employees is up to 90 days pay per individual. Given, however, P&O would have had to have employed the employees for a further 45 days anyway if they were to satisfy the minimum consultation requirements, the true figure is only an additional 45 days gross pay per employee.

Employers do have a defence for a failure to consult in such circumstances; known as the “special circumstances” defence. This defence can be used where it is not reasonably practicable in the circumstances to consult, for example owing to an immediate shutdown. If P&O get away with such a defence we may as well rip up all employment statute now.

Notice Pay

As this was redundancy, a no-fault dismissal, every employee is entitled to be paid their notice pay. This is either their contractual notice or one week for every year of service, up to a maximum of 12 weeks, whatever is greater.

Holiday Pay

All individuals are entitled to their accrued but untaken annual leave for the year.

Redundancy Pay

All individuals with two years’ service will be entitled to at least a statutory minimum redundancy payment, capped at £544 per week (£566 in Northern Ireland).

Unfair Dismissal

It is without doubt that P&O’s actions would amount to unfair dismissal owing to lack of process. Employees need two years’ service to claim unfair dismissal. Compensation of up to 52 weeks’ pay or £89,493, whichever is lower is available for those who qualify.

It cannot be disputed that P&O broke employment law in their actions, however, if they knew this, why did they do it? The simple answer is that they have gambled.

Why P&O did what they did

P&O have simply gambled that the dismissed individuals won’t bring employment tribunal claims against them. The thought process for the dismissals was undoubtedly planned well in advance with this risk in mind and it appears that P&O went down the route of offering settlement agreements to avoid such claims.

Almost immediately following dismissals, reports emerged of individuals being “blackmailed” (unions’ words) into accepting financial settlements. Such settlements would no doubt be in the form of settlement agreements, agreeing that for a financial lump sum, the individual would agree not to bring claims against the company. This appears to be confirmed with P&O confirming that employees were to be “offered £36.5m in total, with around 40 getting more than £100,000 each”. It has been widely reported that each individual’s settlement offer contains their notice pay, an enhanced redundancy payment and a payment for failure to consult.

Putting yourself in the shoes of an individual who has just been dismissed, to be offered a figure that you might not achieve until your case reaches an employment tribunal in up to two years’ time can be appealing, albeit it will still leave a bad taste in the mouth.

Should an individual dig their heels in, however, and not sign the settlement agreement, they could still hold for an employment tribunal finding for the unfair dismissal payment. Such an award does come with a number of caveats, however including a reduction for any benefits or wages received in the coming year. There has also been talk in legal circles of a claim for discrimination, given that the British workers were dismissed and replaced by foreign agency workers. Such a claim is not as straightforward, however if successful, could carry an increased compensation award.

Can government sanction P&O for their actions?

Employers making 20 or more individuals redundant at a single establishment must notify the Secretary of State of such a proposal at least 30 days before the first dismissal (45 days for 100 or more redundancies). Failure to do so can mean directors, managers or the company secretary commit a criminal offence. It appears that P&O did not notify the Secretary of State, at least until the night before.

In a knee jerk reaction, government Transport Secretary Grant Shapps and Business Secretary Kwasi Kwarteng proudly wrote “strongly worded letters” to P&O Chairman Robert Woods pointing out this omission and demanding answers from P&O. This was a great power move, however Mr Woods retired from the Company in December 2021 and was no doubt reluctant to return to answer the letters. Amended letters were quickly sent out by the aforementioned ministers to the current P&O Chairman, Peter Hebblewaite.

There was, however to be further egg on the faces of the government when it transpired that a change in legislation, overseen by former Conservative minister Chris Grayling in 2018, removed the requirement for companies to notify the Secretary of State of redundancies on ships registered overseas. P&O’s ships are reportedly registered in Cyprus and the Bahamas and therefore there was no requirement to report such redundancies to UK government.

Despite ministers’ bluster and media appearances stating that they will be holding P&O to account, there is little the government can actually do to help those individuals dismissed.

What about fire and rehire?

Fire and rehire, or dismiss and re-engage to give it its fluffy name, is a tactic often used by employers when employees fail to agree new contractual terms. It is completely lawful in the UK and has been used most recently by large supermarkets, both successfully and unsuccessfully. Context is key and employers still run the risk of unfair dismissal claims should they be unable to evidence a good business case for the process.

In the P&O case, government are being blamed in the media for a failure to change the rules on the practice of fire and re-hire, however in reality this is a red herring. From reports, it does not appear that P&O had any intention on rehiring the staff they dismissed. Instead, it appears the plan was always to use foreign agency staff, at a reported £1.81 per hour, a rate which is lawful only as they are seafarers on a foreign ship. Therefore, even if the practice of fire and rehire was unlawful, it wouldn’t apply to this current scenario. Even if it did, P&O have shown no regard for current UK employment law in any event, so what would it matter?

Do P&O have any defence?

In respect of employment tribunal claims from former employees, probably not. In a letter from P&O Chairman Peter Hebblewaite to Business Secretary Kwasi Kwarteng, as reported by the BBC, Mr Hebblewaite stated that 786 of the sacked P&O workers were employed by three Jersey-based arms of P&O Ferries. This assertion is no doubt to try and distance the company from any obligations under UK employment law. It is an argument that is likely to fail in the UK courts and tribunals.

Although seafarers do have slightly different rules from normal UK employees, previous cases have found that where an individual’s employment has a sufficiently strong connection with the UK, it would be appropriate for the employee to have UK employment rights. This is likely to be the case here. P&O will not of course admit this publicly.

What next for government?

Given there appears to be no breach of reporting process by P&O and civil claims brought against P&O by dismissed individuals are not a matter for government, there is little government can do on that front.

However, it is widely reported that P&O’s owner DP World, was recently awarded a £25-£50m government contract to operate one of the new freeports in the UK. Government has confirmed that the contract award is now being reviewed. If it transpires that the government cannot withdraw from the contract then the £36.5m payout by P&O to the dismissed employees may seem like a good deal for them after all, despite the fallout.

All in all, whilst on a human level what P&O have done is abhorrent, it is clear that a lot of thought has gone in to the move to dismiss in the manner they have done. Employment legislation, as it currently stands, is limited in what sanctions, whether financial or otherwise, can be imposed on P&O and it will be interesting to see whether government now looks at introducing further legislation to dissuade companies from similar actions in the future.

For information and support in relation to employees or any employment matters, contact Steve Conlay at  steve.conlay@bpe.co.uk or call 01242 248444

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