On 18 March, the giant ferry operator news hit the headlines with talk of mass redundancies having been made to plug a £100 million year-on-year deficit. Reports suggested that 800 workers had been dismissed via a pre-recorded video message. No consultation process had been followed with trade unions or individuals.
It was announced that staff would be served with "enhanced" severance packages, with the company calling it a "necessary decision" to protect its remaining 2,200 staff as the business was "not viable" in its current state, and that the severance packages had to be entered into by a deadline of 31 March 2022.
Fire & Rehire
In a further shocking revelation, the Company was said to have replaced redundant staff with foreign agency workers reportedly paid less than the UK National Minimum Wage (NMW) although in recent days they have argued this is an administrative error. The story has caused and continues to cause widespread public and political outcry with calls for a change to the law to prevent the practice of ‘fire and rehire’ and 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.
Did P&O break the law?
The approach favoured by P&O is not uncommon. Employers take calculated risks, based on commercial considerations, often making decisions not to not comply with the law. They choose to circumvent any procedural requirements to effect a fair dismissal process by making an offer ‘off the record’ for sums in excess of contractual and statutory entitlements. Quite often, the financial savings in avoiding a long drawn out consultation process outweigh the risks especially where an analysis has taken place to adequately quantify the financial exposure of tribunal claims.
What should employers do?
Due to the number of redundancies, P&O was required to consult with appropriate representatives of the affected employees to try and reach an agreement.
Consultation steps:
- Must start 'in good time'
- Last a minimum period of 30 days where between 20 and 99 employees are to be dismissed, or a period of 45 days (where 100 or more employees are to be dismissed).
Any way out of it?
The only way to avoid the requirement to consult is if an employer is able to demonstrate that there are 'special circumstances' that make consultation not reasonably practicable. The exclusion applies only in exceptional cases and would rarely exempt an employer from conducting a ‘reasonably practicable’ consultation under the circumstances (as opposed to not at all).
What happens in event of breach?
Qualifying employees have grounds to claim unfair dismissal, but there is also a special 'protective award' of up to 90 days actual gross pay per affected employee. The purpose of this protective award is punitive, i.e. to punish an employer for their failings. Employers also risk fines and other potential sanctions should they fail to notify BEIS of the proposed redundancies.
Enhanced severance
Shortly after the initial news broke, it was reported that more than half of the workers had already accepted the severance terms; which is often the case in similar situations especially where the alternative is potentially a very long wait for an Employment Tribunal hearing; the outcome of which is not known.
By failing to follow the letter of the law and offering Settlement Agreements to workers with enhanced financial generous severance terms which in most cases are likely to be more than an individual could get at an Employment Tribunal in notice pay, unfair dismissal compensation and “protective awards”, or for a complete failure to collectively consult over redundancies.
Demands from Mr Schnapps to reinstate the employees seemingly fell on deaf ears, in addition, it was unlikely that staff previously employed on higher salaries would be willing to be re engaged on less favourable terms to include reduced remuneration.
New statutory code introduced by Government following P&O Ferries redundancies
The new Code does not prevent employers from taking action, but acts as a deterrent and adds protection for staff who might suffer unfair treatment. The code reinforces government expectations for employers to behave reasonably towards their employers.
A Statutory Code of Practice is guidance rather than strict legal obligations. The effect of the introduction of such a code is that Tribunals and courts will be required to take compliance/extent of an employers failure to follow a Code in unfair dismissal claims. Courts will have the power to apply an uplift of up to 25% of an employee's compensation.
No stop to fire and re hire
The P&O Ferries situation was not in reality a fire and re-hire, but actually just a fire. The Ferry giant argued that the decision not to consult with its staff was one driven by business needs and was allegedly essential for the survival of the company.
Fire and rehire is often used in similar circumstances where employers argue that there is a need to terminate employment on current contractual terms and offer re-engagement on less favourable terms, as this is necessary for the survival of the business.
So in summary, “Fire and rehire” remains legal. The government has previously confirmed that it has no intention of legislating against the practice following an ACAS report last year and whilst the code goes some way to protecting those who are fired and face unfair dismissal when they should have been consulted with the practice itself and the use of it remains a live issue.
For advice on redundancy or consultation procedures contact Kaajal Nathwani of the Employment Team on 020 8363 4444 or by email This email address is being protected from spambots. You need JavaScript enabled to view it..
