What can we learn from P&O Ferries about collective redundancies?

P&O Ferries’ recent dismissal of 800 members of staff with immediate effect raised serious questions as to the legality of these summary mass redundancies.  The saga is on-going, with the Transport Secretary calling on P&O to re-instate the sacked staff and P&O responding that to do so would cause the cCompany’s collapse (29 March).

Under UK law, any entity that proposes to dismiss 20 or more employees as redundant within a 90 day period must consult with representatives of the affected employees (collective consultation).  They must also notify the Secretary of State (for Business, Energy and Industrial Strategy) of the proposed redundancies.

An employer that fails to comply with these obligations risk being on the end of claims with quite penal compensation.  The failure to notify BEIS is a criminal offence and charges can be brought against the employer and in some cases individual directors. Anyone convicted is liable to unlimited fines.

The question of whether or not some or all of the sacked UK P&O staff are covered by the above UK obligations may turn on quirks of maritime or international law, which is beyond the scope of this article.  We will consider the legal implications for any employer who acts in breach of UK mass redundancy laws.

Redundancy is well defined as a dismissal for a reason not related to the individual concerned; it occurs when an employer needs to reduce their workforce for one reason or another. Redundancy is a fair reason for job termination (provided a fair process has been followed) and can commonly arise when an employer needs to reorganise the way a business is run or make cost savings.

If an employer plans to make fewer than 20 employees redundant, they must follow a fair process and conduct individual consultations prior to making individual redundancies. If an employer wishes to make 20 or more employees redundant within 90 days at any one establishment (e.g. any one individual store or branch), this would trigger the obligation to follow a collective consultation process.

If an employer has failed to comply with its collective consultation obligations, affected employees can bring an employment tribunal purely based on this failure.  If the claim is successful, the tribunal can order a ‘Protective Award’ of up to 90 days’ gross pay to each affected employee.  This could be in addition to any unfair dismissal claims arising out of the same mass redundancies.  Unlike with unfair dismissal claims though, the employee does not need to suffer loss to be awarded a protective award.  Nor is there a duty on an affected employee to mitigate their loss.

Collective consultations must start at least 30 days before the first dismissal takes effect. This timeline increases to 45 days if the employer proposes to make 100 or more employees redundant.  Collective consultation is started by the employer providing certain prescribed information to employee representatives including details of the proposed redundancies and selection process.
Consultations are required to be ‘meaningful’ and employers must share all necessary information to support the progress of the consultation. Consultations are required to include discussions around ways to avoid the dismissal, how to reduce the number of employees to be dismissed and ways to mitigate the effects of the dismissals.

Unsurprisingly, it is not always possible to find ways of avoiding dismissal through meaningful consultation. Nonetheless, creative and practical solutions can still be the product of genuine and meaningful collective consultations. This has been particularly evident in recent times, where we have seen an increase in employers and employees working collaboratively to minimise job loss by agreeing to alternative measures such as reduced hours.

If P&O’s 800 UK employees are protected by the full extent of UK employment law, P&O may find themselves on the receiving end of multiple and expensive claims.  Or, as appears to be the case, offering settlement agreements to dismissed employees before any claims get off the ground.

See below some key reminders to employers when considering collective redundancies:

• An individual consultation is required in all redundancy cases, regardless of the number of proposed redundancies. The obligation to consult collectively is an additional legal requirement where 20 or more employees are at risk of redundancy. Lack of an individual consultation in any instance may lead to the employer receiving an unfair dismissal claim.
• Employers may have a defence to not holding a collective consultation if they can show there were special circumstances which resulted in the consultation not being reasonably practicable. However, the employer would have to show that a ‘sudden and unexpected’ disaster meant that it was not reasonably practicable to consult with employees. This defence is extremely difficult to prove and it is very hard for businesses to meet the required threshold.
• By law, the employer must inform the Secretary of State (for Business, Energy and Industrial Strategy) before the collective consultation begins. Notification takes place by filling in a form HR1 at least 30 or 45 days (depending on the number of dismissals) before the first dismissal takes effect. Failure to do so could lead to criminal penalties.
• See here a helpful guide from ACAS for more information regarding best practice when dealing with large-scale redundancies.