P&O Ferries directors: should they be fined?

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It is unlikely to have escaped many people’s attention that P&O Ferries recently made the controversial decision to make around 800 employees redundant.

The announcement has shocked and angered many, not least because of the way that employees were notified with no prior warning.

It now needs to be considered whether the directors of the ferry company should be prosecuted and fined under UK legislation for their failures to comply with UK employment law obligations which govern redundancies. As the redundancies affected more than 20 employees, UK legislation requires them to notify the Secretary of State through the Department for Business, Energy and Industrial Strategy (BEIS) and commence collective consultation (more on this later…), however, P&O Ferries failed to do either.

Following the announcement, and the subsequent anger and disappointment directed towards the company, the Government wrote to the CEO of P&O Ferries to request details about the redundancies, and they expressed disappointment that the company considered themselves to be sufficiently aligned with the UK to claim millions of pounds under the furlough scheme, but not sufficiently aligned to follow UK law in relation to the redundancies.

P&O Ferries have recently responded stating that the affected employees were employed by Jersey companies and worked on vessels which were registered outside of the UK. It was their position that they did not need to notify BEIS but that they were only required to notify authorities of the states in which the vessels were registered (which they argue they did).

P&O Ferries have accepted that they failed to consult with staff, however, they have argued that they had no alternative in order to continue trading and that no union would have accepted the planned changes.

We understand that the failures are being investigated and if P&O Ferries are found to have breached the legislative requirements, the directors could face prosecution and unlimited fines. That being said, we are not aware of any historic successful prosecutions against directors for breaches in this respect and so it remains to be seen how real the risk of any prosecution is. Employees could also seek substantial awards for unfair dismissal (see our recent note on this here), although it has been suggested that employees were forced to sign settlement agreements in exchange for enhanced pay outs.

So, with all of that in mind, what does your business need to do to avoid the negative publicity, and more importantly, the risk of prosecution, if it needs to make a large number of employees redundant?

It is important to remember that there are always consultation obligations for employers to comply with when making redundancies, however, in this note we focus on the requirements for mass redundancies (i.e., 20 or more redundancies within a 90-day period).

Where an employer proposes to make 20 or more redundancies within a 90-day period, key points to consider are:

  1. There is a duty to inform and consult with representatives of the employees, rather than all of the affected employees themselves.
  2. The employer must notify the BEIS using form HR1.
  3. If a trade union is recognised, the trade union must be consulted.
  4. There are specific rules governing the election of employee representatives that must be complied with. 
  5. The consultation must begin at least 30 days prior to the first dismissal taking effect (although this is increased to 45 days where there are more than 100 redundancies taking effect).
  6. There are requirements as to what information must be provided to the employee representatives.
  7. Consultation should be undertaken with a view to reaching an agreement on the ways and means of avoiding the dismissals, reducing the number of dismissals and mitigating their consequences. 
  8. Where there are ‘special circumstances’ which mean that it is not reasonably practicable to consult in good time or provide the statutory information, the employer does not necessarily need to comply with the duty in full but must still take reasonable steps towards compliance. What can amount to special circumstances in this regard has been interpreted narrowly.

Whilst this can seem burdensome for employers to comply with, the requirements are there to protect employees from a situation such as that which arose with P&O Ferries and the consequences of failing to comply can be very serious and costly. Don’t take the risk – get in touch if you need any assistance with the notification and consultation obligations so that you don’t end up in hot water!

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