P+O Dismissals Explained

Over the course of the last few weeks, there’s been a good deal of news coverage and commentary about P+O Ferries decision to dismiss around eight hundred employees and replace them with overseas agency workers, without any prior notice.

The dismissals are being widely referred to as being redundancies, but in reality this cannot be the case. Redundancies occur where either an employer ceases trading or ceases to carry out a particular activity such that particular roles are no longer needed, or where workload levels demand a reduction in the need for as many people in a particular role. This isn’t the case with P+O Ferries as the dismissed employees have been replaced.

Much of the press activity is focused on the dismissals being unfair because the employer didn't consult with the employees and their trade unions before the dismissals, but even if this consultation taken place, the dismissals would still have been unfair because they aren’t for one the potentially fair reasons (conduct, capability, redundancy, statutory illegality or some other substantial reason). It’s hard to see that these dismissals are anything more than employees being told, in The Apprentice style, ‘you’re fired!’

Where an employer is contemplating making twenty or more employees redundant from a single location within a ninety day period, they are legally obliged to notify the Government (by filing a form HR1); it is a criminal offence not to file this before dismissals take place and failure to do so can result in the company and/or its officers being convicted and fined. An separate HR1 must be filed for each location where twenty or more redundancies are thought likely.

Had this have been a genuine redundancy situations employers have a legal obligation to consult with affected employees and their trade unions or elected representatives as part of the process to make any dismissal on the grounds of redundancy fair. A minimum period of consultation must take place before notice of termination is issued to affected employees. Where one hundred or more employees may be dismissed from a single location, there is a minimum consultation period of forty-five days, that is to say there must be a minimum of forty-five days worth of meaningful discussions with employees and their representatives aimed at avoiding redundancies before letters of termination are issued.

Where between twenty and ninety-nine employees may be made redundant from a single location, the minimum consultation period reduces to thirty days. Where it is less than twenty employees, there is no specified period but it’s widely accepted that under most cicrumstances, anything between ten to fourteen days would be acceptable.

P+O Ferries have admitted to not filing the necessary HR1 forms in advance of dismissals and didn't engage in any form of consultation; perhaps this is because they understood that these dismissals weren't redundancies.

What does this mean?

In short it means that each employee with at least two years service has a claim for unfair dismissal and there is little doubt that they would win; the level of compensation that they would receive would depend on (a) their salary and (b) how long it took them to find another job, albeit compensation is capped at one years gross salary or £93,878 whichever is the lower.

Each employee will likely also have a claim for the employer failing to consult with them; this is a maximum of ninety days salary, irrespective of their long of the service.

P+O will likely be prosecuted and will likely be fined for failing to advise the Government of its intentions before acting.

So why did P+O do it?

The most likely explanation is that in the circumstances, it made commercial sense to them to do so. They will have worked out the potential huge ongoing cost savings of employing overseas labour (their ships are registered overseas so not subject to UK National Minimum of Living Wage legislation) and compared this to the costs of settling any resulting unfair dismissal claims and have concluded that it saved them money in the long-term to do what they did.

Press coverage recently (BBC News) suggests that five hundred affected employees have already settled and it’s likely that some of the remaining three hundred have less than the minimum two years service to be able to bring a claim against their employer. Such settlements may well be much lower than any resulting Employment Tribunal awards if only because it could take up to two years for their claims to be heard and the employees likely need cash now to replace their lost salaries.

Employers considering a similar approach need to not only consider the legal implications of their actions in terms of Employment Tribunal claims but also repetitional damage in regard to possible future employees and customers. P+O may well have weathered the storm in terms of press coverage within a few weeks, and some customers may choose to use competitors where that’s even possible, but I suspect that P+O may have issues in the future in attracting employees.

For more information on this or any other HR matter, please give us a call.