While many have questioned the legality of P&O Ferries’ handling of its redundancies, the reputational damage could be just as costly
P&O Ferries’ decision to sack 800 staff via video call on Thursday (17 March) has been described by trade unions as a “shocking” way to treat workers.
The company claims the mass sacking was necessary to cut costs and keep the business viable. It plans to replace the dismissed employees with cheaper agency workers, some of which the National Union of Rail, Maritime and Transport Workers (RMT) alleges are being paid $2.38 (£1.80) an hour.
Although this figure is well below minimum wage for British workers, it is possible that its ships are registered in countries outside the UK. This would mean that UK legislation may not apply to any such migrant workers engaged from other countries, according to Winckworth Sherwood employment lawyer Andrea London.
RMT general secretary Mick Lynch describes the move as a “gut-wrenching betrayal” of its staff, claiming that “the rule of law and acceptable norms of decent employment and behaviour have completely broken down”.
The government is reviewing its contracts with the firm and has requested that its Insolvency Service investigates whether the British ferry operator, which was acquired by Dubai-based DP World in 2019, breached employment law during the handling of the redundancies.
Did P&O Ferries break employment law?
Current employment law requires that any organisation which plans to make 20 or more people redundant within a 90-day period hold consultations with a recognised trade union or elected employee representative first. Consultation must start at least 45 days before the first dismissal if 100 or more redundancies are taking place, while the company must also notify the UK’s business secretary - in this case Kwasi Kwarteng.
In a letter to P&O Ferries CEO Peter Hebblethwaite, Kwarteng expressed the UK Government’s “anger and disappointment” at the way the company handled the redundancies and warned that it could face an unlimited fine if employee consultations were found not to have taken place.
Adam Pennington, an employment law specialist at Stephensons Solicitors, says the apparent failure of P&O Ferries to comply with its legal obligation to consult with members of staff before making them redundant is “concerning”.
He adds: “A failure to inform and consult with members of staff at risk of redundancy can give rise to a number of claims including unfair dismissal and claims for a ‘protective award’ for failing to comply with the minimum consultation periods.”
Slater and Gordon’s head of employment law Jo Mackie agrees that any failure to hold collective consultation would be unlawful. She says: “In the UK, your rights on redundancy are protected as an employee. You can’t get around not following the proper redundancy process.”
Should there be changes to employment law?
The Trades Union Congress is calling for the treatment of P&O Ferries’ staff to be “a catalyst for change on workers’ rights”. It believes government must “urgently bring forward an employment bill to stop workers from being treated like disposable labour”.
The public are broadly in agreement, with a YouGov poll finding that 83% of British adults believe it should be illegal for companies to be able to make large sections of their workforce redundant and immediately replace them with outsourced lower-paid workers doing the same jobs. But London believes that any subsequent changes to employment law in the UK would be unnecessary.
“Our employment laws are generally considered to be fairly comprehensive, although it is well known that other European countries – particularly France and Spain – have substantially more employee-protective legislation,” she says. “It is not the fitness of the law here which is in issue, but the fact that P&O Ferries has determined to entirely disregard it.”
If P&O Ferries is found not to have followed a proper redundancy process, then it is up to the trade unions and their members to decide what to do next. Although Mackie hasn’t seen the details, she adds: “If the allegations are true, you could choose to bring an employment tribunal claim for breach of collective consultation rights or you could agree to a settlement and find a job elsewhere with an employer that might treat you better.”
If the case went to tribunal, the maximum penalty could be considerable. London says: “While the financial amount of the employees claims are limited: unfair dismissal being the lesser of up to 1 years’ salary or £89,493; and up to 90 days actual pay per employee for failure to collectively consult, if you multiply those individual claims by up to 800 times, the overall compensation awarded will not be small.”
Rustom Tata, the chairman of law firm DMH Stallard, believes that, given the employer’s approach, “it is likely that the employees will find considerable sympathy in an Employment Tribunal” when any case is heard.
He adds: “One has to question the extent to which the integrity of the P&O Ferries brand will be impacted not only by the fact of redundancies, but also by the apparently wholly planned approach being taken to such a large proportion of its workforce that ignores some of the basic fundamentals of employee relations.”
P&O Ferries could face reputational damage
Beyond the legal ramifications, there will be a reputational cost for the company, which now finds itself embroiled in an employment scandal. Although Limelight HR founder Sally Bendtson acknowledges that businesses have to make redundancies when they come under financial pressure, she questions the way workers have been treated.
“If you’re honest and transparent, the person might not like the situation they’ve been caught in, but they’ll understand it and will quite often remain supportive of the company,” she says. “When people aren’t given the opportunity to be heard or to have their say, that’s when they’re left with feelings of anger and frustration.”
Beyond the poor treatment of its staff, passengers were also left stranded as the company cancelled all upcoming services and warned of “significant disruption”. Speaking to Sky News, one couple said they were “abandoned” by P&O Ferries after their return travel from Ireland was cancelled.
This is reflected in data from YouGov BrandIndex, which saw all measures of P&O Ferries brand reputation drop between 14 and 20 March. Its recommended score – which determines whether people would be more likely to recommend or tell a friend to avoid a brand – fell from 14.6 to -7.1, while its ‘buzz’ score also plunged by 24 points over the same period, from 0.5 to -24.5. This metric, which measures the balance of positive and negative commentary around a brand, suggests people are now more likely to have a negative perception of the brand.
The business secretary also pointed to the fact that P&O Ferries was in receipt of “millions of pounds” of taxpayer support during the pandemic, through the furlough scheme. Bendtson adds: “You can only assume that the business was putting finances first but, even if they have accounted for the potential cost of numerous claims, there will also be the reputational risk, which will be a huge cost.”
Despite P&O Ferries’ hopes to halve its wage costs by firing hundreds of employees, the hidden cost of the reputational damage the episode has caused could continue to rise. “On every level it’s been mishandled,” Bendtson says.
P&O Ferries were contacted for comment but had not yet replied by the time of publication.