Further developments in the P&O Ferries case - a review of the Business and Transport Committee

Further to our recent blog (available here), the P&O news story has continued to develop, as a joint Business and Transport Committee hearing took place regarding the dispute on Thursday 24 March. This included an appearance by the CEO of P&O Ferries, Peter Hebblethwaite, as well as discussions with legal specialists and trade union representatives, amongst others.  Whilst the headline news was the admission that Hebblethwaite believed that P&O Ferries had broken the law, the wider discussions had are also notable.

The first panel to sit before the joint committee was made up of three legal experts. In particular, it was highlighted that under UK employment law there is a requirement that where a company is planning redundancies on a large scale, it must notify the Department for Business, Energy and Industrial Strategy (BEIS) Secretary of State, and consult with appropriate representatives. More specifically for this particular dispute, where flagged ships are registered in other countries, notice must be given to the appropriate country where that ship is flagged before the first dismissal.

It was noted that the three ships involved in the mass redundancies announced by P&O on Thursday 17^th March were registered in Cyprus, the Bahamas and Bermuda. The respective notice requirements were 30 days’ notice for the Bahamas and Bermuda, whilst 45 days’ notice was required for Cyprus.  Hebblethwaite later confirmed during his appearance that the notification to these countries was given on 17^th March, the same day the redundancies were announced.

Hebblethwaite admitted that P&O Ferries deliberately did not consult with trade union representatives prior to announcing the redundancies and he had ‘no doubt’ that this was breaking the notification rules. He went on to say that it was P&O Ferries’ assessment that ‘no union could possibly accept our proposal.’ In essence, P&O concluded that the best business decision was to ignore the legal requirements and attempt to compensate the relevant employees after the fact.

An important issue now is what potential remedies there may be open to the UK Government and those who have been made redundant against P&O, and, perhaps more importantly, how effective any available remedies may be.

In terms of criminal remedies, a failure to notify the Secretary of State before giving notice of termination is a criminal offence for which the Secretary of State may institute summary proceedings. Conviction may result in liability for an unlimited fine, not only for the employer but also for any director or shareholder, where the employer’s company’s affairs are managed by its members and where the offence is proved to have been committed with their consent or connivance, or to be attributable to their neglect.

In terms of civil remedies, where the employer has failed to comply with the statutory requirements to inform or consult with appropriate representatives, a complaint may be made to the Employment Tribunal for a protective award. As explained in our previous blog, a protective award can be claimed for up to 90 days’ pay with no limit on the amount of weekly pay that can be recovered. However as was noted by Professor Alan Bogg, Professor of Labour Law at University of Bristol at the committee meeting, although this is a significant remedy, because it is capped it allows an employer like P&O to calculate in advance and buy itself out of the rule of law by giving compensation packages beyond what the legal remedies could be.

This is potentially what has happened in this case. Hebblethwaite went into some detail regarding the compensation packages that P&O Ferries are offering the workers who have been made redundant. In summary, there will be a small number of people receiving upwards of £170,000, 40 workers that will receive more than £100,000, and a minimum of £15,000 paid to every employee.

It is likely that P&O Ferries decided to take a calculated risk, by pitching their compensation packages at a level where it is more favourable for a former employee to accept the compensation and inevitably sign a settlement agreement giving up rights to pursue claims against the company, rather than to seek legal remedies under the applicable employment legislation.

This, however, will not avoid the potential criminal liability mentioned above, nor has it made the publicity surrounding the decision more positive for the company, with Hebblethwaite now facing calls for his resignation from UK Government ministers. It’s likely that there will be more to come on this story.