Dismiss now, pay later: The P&O Scandal

Cole Khan Solicitor Tom Moore, and Partner Emilie Cole discuss the growing fury at P&O’s strategy of ‘Dismiss Now, Pay Later’.

Executives at P&O Ferries probably didn’t expect the furore and universal condemnation that has come their way in recent weeks.

As the Spirit of Britain arrived in Dover, resuming services this week for freight customers for the first time since sacking around 800 seafarers on 17 March, the situation remains very much in the headlines, as we now hear renewed calls for the CEO, Peter Hebblethwaite to step down, pay minimum wage to crew and pay £11m of furlough money.

The Dismissals

When the disgraceful footage of a P&O executive dismissing around 800 workers without notice (via a pre-recorded video message) circulated and attracted media attention, their management may have thought they could ride the wave of negative press, and manage the legal liabilities that arose as a result of their decisions.

The Business Decision

Although the facts of each case are different, this isn’t the only recent high-profile instance of a company opting to dismiss its employees as opposed to engaging in meaningful discussions, leading to debates and allegations of underhand ‘fire and rehire’ tactics.

From their actions, it is clear that the management of P&O Ferries have taken a commercial decision, and the bad press and legal liability were considered an acceptable cost of business. Given an employer’s potential liability in these situations, it is akin to making a tactical foul, and hoping to accept a yellow card.

The Reaction

During a savaging from MPs at joint hearing of the transport and business committees, the CEO of P&O Ferries, Peter Hebblethwaite, admitted that while the law obliged employers to engage in redundancy consultations, the company chose not to. Instead, settlements are being offered. It is reported that dismissed staff will be offered a total of £36.5M.

Transport Secretary Grant Shapps suggested that P&O Ferries’ management ‘exploited a loophole’, and that the law would be changed. Then, he went a step further and called for the CEO to resign, a call which has been backed by the Prime Minister.

But what have P&O Ferries done, what is their legal liability, and how can this be prevented in the future?

The Law

In a normal mass-redundancy scenario, there is an obligation on the employer to consult with potentially affected employees for a specified time before any dismissals are made, and to notify the Secretary of State for Department For Business, Innovation & Skills (“BEIS”). Dismissing an employee who has at least two years’ service - without notice or consultation - also exposes an employer to claims of unfair dismissal in the Employment Tribunal, in addition to claims for notice and other contractual pay. Failure to notify BEIS can give rise to individual liability for directors, and expose a company to fines. Failure to inform and consult employees may also result in further liability in the Employment Tribunal in respect of a declaration and a ‘protective award’.

The Problem – and Proposed Solutions

The problem for the dismissed P&O workers is that once they have been dismissed, the onus is on them to seek redress. Clearly the other disincentives as set out in relevant legislation haven’t dissuaded the management of P&O Ferries from acting as they did. Indeed, the CEO has said he would do the same thing again.

While the government has said something needs to be done, it is clear that enforcement needs to be stronger, and real disincentives are needed to prevent other companies deciding to dismiss large numbers of employees without notice, and going through proper processes. This might mean provisions for increased fines, further punitive damages, or for certain organisations to be able to bring claims on behalf of dismissed employees, reducing the cost burden on those affected.

It may be that the biggest financial damage to P&O Ferries will be loss of business arising from the negative media attention. Clearly, as it stands, the risk of public shaming is not an adequate enforcement mechanism for rogue employers.

Contact Cole Khan for expert advice on redundancy, dismissal, and settlements. You can contact Emilie and Tom at emiliecole@colekhan.co.uk and tommoore@colekhan.co.uk or email the team on hello@colekhan.co.uk