As you may have heard on the news, P & O Ferries recently dismissed 800 of its employees without warning or notice. The news was delivered to the affected employees via video call on 17 March 2022 and, just like that, 800 employees learned that they were out of a job.
The move, rightly, attracted widespread criticism and many were left wondering how, in this day and age, a business could treat its staff in this way. The outrage was further fuelled by reports of employees being removed from ships as they attempted to remain on board in protest, and rumours that the employees were being immediately replaced with agency staff on significantly lower rates of pay. Surely, the media cried, P & O Ferries had broken every employment law in the book by displaying such apparent disregard for fair process. Not so, however, claimed the ferry operator, who announced, shortly after the dismissals, that the affected employees were not, in fact, employed in the UK and therefore there had been no breach of UK employment legislation. The company also tried to defend its actions, stating that it had no choice but to dismiss workers or face taking the company into administration.
P & O Ferries has since announced that it intends to pay £36.5 million in compensation to the workers that it unceremoniously dismissed, with some long serving employees set to receive over £170,000 in compensation. The compensation has been said to be the biggest pay-out in maritime history with no worker set to receive less than £15,000. In return for acceptance of such payments, it is understood that the employees will be required to sign non-disclosure agreements, agreeing not to disparage the company – a requirement that you could argue is somewhat obsolete given the hammering the company’s reputation has already taken since the news broke.
Whereas the question of whether P & O Ferries did, in fact, breach UK employment laws is still under debate, the whole debacle highlights how important it is that employers engage in collective consultation when proposing to make large scale redundancies and also how essential it is that the process is carried out as fairly and considerately as possible, remembering that – however stark or immediate the choice for the business may be – there are livelihoods at stake.
Perhaps the biggest question is not whether any laws were broken but how P & O Ferries lost sight of the human picture?
When collective consultation is required
Collective consultation is necessary when an employer proposes to make 20 or more employees redundant at any one establishment in a period of 90 days or less.
Where the duty to collectively consult arises, the employer is required to consult with elected representatives of the affected employees regarding the redundancy proposals. If the employer already recognises a trade union, then the consultation will take place with the union representatives. However, if no union is recognised, the employer will need to arrange for the election of employee representatives. This is done through a ballot with each affected employee given the opportunity to elect a representative from a list of nominees.
Informing the Secretary of State
Where the duty to collectively consult applies, the employer must also notify the Secretary of State for Business, Energy and Industrial Strategy of its redundancy proposals. A failure to do this is a criminal offence.
Importance of collective consultation
The importance of engaging in collective consultation cannot be understated not least because of the legal and commercial consequences that follow.
When the obligation to collectively consult arises, it effectively operates as a moratorium on the proposed dismissals so that an employer is unable to make any redundancies until after a prescribed minimum time period of consultation has expired.
Whereas consultation should always begin in good time to allow for meaningful discussions to take place, minimum periods are imposed depending on the number of employees affected.
Where between 20 and 99 employees are affected, the consultation period must be a minimum of 30 days before the first dismissal takes effect. Where 100 or more employees are affected, the consultation period must be at least 45 days before the first dismissal takes effect.
It is perhaps unsurprising, given these minimum consultation periods, that some employers may be tempted to cut corners or to offer inducements to staff to avoid these obligations. However, the financial consequences of failing to properly comply with the duty to collectively consult can be severe. The maximum sanction for failing to comply with the duty to collectively consult is a “protective award” of up to 90 days’ gross actual pay for each affected employee. Furthermore, the award is not based on loss of earnings, but on the seriousness of the employer’s default.
It goes without saying, therefore, that if at least 20 employees are affected by the redundancy proposals, the potential sanction can be quite substantial.
The process of the consultation
The process starts by the employer giving the employee representatives certain information about the proposals that is prescribed by law. What then follows should be proper, meaningful engagement. It is not enough for an employer to explain its proposals and then listen to any counter-proposals. As a minimum, the employer is required to undertake the consultation with the intention of reaching agreement on the ways and means of avoiding the dismissals, on reducing the number of dismissals and also mitigating their consequences.
Special circumstances defence
There is a special circumstances defence to the collective consultation rules which can be used but as its name foretells, the circumstances must be “out of the ordinary”. The guidance we have from case law regarding this defence is that the assessment of the circumstances requires a consideration at the relevant time of the actual events and the practicalities of consultation.
Even where there are special circumstances, this does not absolve the employer from the obligation to consult. An employer must still fulfil those obligations with which it was reasonably practicable to comply, or which were unaffected by the special circumstances, and must still take all steps towards compliance as are reasonably practicable in the circumstances of the case.
Helping you with the process
The above is a very brief outline of what can be a tricky process to navigate. At Real Employment Law Advice, we are experienced in advising on redundancies, whether individual or collective, and can provide you with any advice and assistance you need whether that be helping with the initial planning stages or providing support when having the difficult conversations.