As nearly 800 P&O Ferries employees were dismissed on 17 March 2022, many asked the question of whether their actions were legal. P&O Ferries CEO, Peter Hebblethwaite, admitted to MPs that his Company broke the law by failing to consult, whilst maintaining that he would make the same decision again
The story is a useful reminder of an employer’s collective consultation requirements and the legal and commercial consequences of getting the process wrong.
What is involved in a collective consultation process?
Where the employer makes a proposal to dismiss as redundant 20 or more employees at one establishment, within a 90-day period, the employer is required to engage in collective consultation with a recognised trade union or elected employee representatives.
This process is geared towards minimising the impact of redundancies on impacted employees by providing a period of time, while the redundancy proposal is still in its infancy, for discussions before any dismissals take place.
The consultation process must be conducted with a view to reaching agreement with the employee’s representatives on: avoiding dismissals, reducing the number of dismissed employees and mitigating the consequences of dismissals.
Where an employer is proposing to dismiss between 20 – 99 employees within a 90-day period, consultation must begin at least 30 days before the first dismissal takes effect. Where the number is more than 100 employees, this increases to 45 days.
Employers are also required to notify the Secretary of State of their proposals.
The costs of getting it wrong
P&O staff were told that P&O would not be ”viable” without jobs being cut immediately. Employers are accustomed to weighing up legal risk against the commercial realities of day-to-day operations. Not only has P & O’s approach been a PR disaster there is usually little commercial sense in taking such a ruthless decision, especially when one considers the value legal risks.
One key component of an award for failure to collectively consult is a protective award. The award is capped at a maximum of 90 days’ gross pay per employee but considering the nature of these dismissals and their sudden nature, one would have expected a hypothetical award in such a case to at this maximum level. be near the maximum amount. This would be on top of payment for notice for impacted employees and unfair dismissal awards and redundancy payments..
However, P&O pre-empted these actions through a reported £36.5 million severance package to cover all their impacted employees via settlement agreements.
P&O could also now face potential criminal charges for failing to inform the Secretary of State about the proposed redundancies. The Insolvency Service announced on 1 April 2022 that it had commenced formal criminal and civil investigations. Comment
Most employers will not have to deal with redundancies on such a large scale, but this unfortunate situation is a reminder for employers that disregarding the requirement to consult not only has legal and financial risks, but reputational and commercial ones too. Paul McGowan is Managing Partner at specialist employment lawyers Collingwood Legal www.collingwoodlegal.com
