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What Lessons can Employers Learn from the P&O Affair?

What Lessons can Employers Learn from the P&O Affair?

P&O has drawn widespread condemnation for the way it has dismissed around 800 employees from its ferry services in the UK. The affair has brought attention to UK employment law surrounding redundancies.

If the employees who were dismissed are protected by UK employment law, P&O’s actions are almost certainly unlawful.

What Employment Legislation protects British Employees?

Redundancy

Section 139 of the Employment Rights Act 1996 sets out the legal definition of redundancy:

An employee is made redundant if the dismissal is wholly or mainly attributable to the fact that:

  • The employer has ceased or intends to cease continuing the business, or
  • The need for employees to perform work of a particular kind, or to work at the location in which they are employed, has ceased or diminished, or is expected to do so

P&O have stated that the staff have been made redundant. However, they also state that the work will in future be undertaken by a ‘third party provider’. As the work is clearly still available, this does not meet the legal definition of redundancy under UK employment law.

If the redundancy is not genuine, the employees who have been dismissed would have a strong case for unfair dismissal.

Collective Consultation

If an employer plans to make 20 or more people redundant, there is a minimum period of collective consultation required before the first dismissals can take effect, (Section 188, Trade Union and Labour Relations Act 1992). The length of the minimum consultation is 30 days for 20 to 99 employees, or 45 days for 100 or more employees.

This consultation should explore ways of avoiding the dismissals, reducing the number of employees to be dismissed and mitigating the consequences of the dismissals.

If an employer does not meet consultation requirements, employees can make a claim to an employment tribunal. If the claim is successful, the employer may have to pay compensation to the affected employees and can be 90 days’ full pay for each employee.

Redundancy Pay

Employees who have been employed for over two years are entitled to statutory redundancy pay as follows:

  • Half a week’s pay for each full year they were under the age of 22
  • One week’s pay for each full year they were aged 22 or over, but under 41
  • One and a half week’s pay for each full year they were 41 or older

Length of service is capped at 20 years and weekly pay is currently capped at £577.00. This figure is gross pay before tax.

Following UK legislation, any P&O employee with more than two years’ service who have been made redundant, regardless of the lack of a consultation process, will be entitled to redundancy pay.

Notice Periods

P&O dismissed its employees with immediate effect. So, are the staff entitled to notice pay?

The answer is ‘yes’. When employees are made redundant, they are entitled to notice pay in addition to any redundancy pay, irrespective of whether the staff actually work their notice period.

The notice period is whichever is the higher of contractual notice, (what the contract sets out as the notice period which must be worked), or statutory notice, (the basic minimum).

Statutory notice is:

  • 1 month to 2 years’ service – statutory notice is 1 week
  • 2 to 12 years’ service – statutory notice is 1 week for each full year worked
  • 12 years’ service or more – statutory notice is 12 weeks

It is assumed that P&O staff will be paid in lieu of notice. This can only be done if there is a contractual provision which allows it. Otherwise, P&O will have breached the employees’ contract of employment.

Conclusion

Assuming that P&O staff are protected by UK employment legislation, it appears that they have breached a number of laws. The affected employees would be able to commence legal proceedings for unfair dismissal and failure to follow the collective consultation regulations.

When undertaking a regulatory exercise, it is essential that employers follow a full and proper procedure. This should include a thorough consultation process in an attempt to minimise the need for compulsory redundancies. This will help protect the employer from legal claims for unfair dismissal and also the terrible publicity and reputational damage which can come about if the legal rules are not followed.

Disclaimer: This article is for general guidance only and aims to provide general information on a relevant topic. This article should not be regarded as legal advice. Any action in relation to employment regulation should not be taken without obtaining specific legal advice.

For more information or for a full review of your insurance needs, please see our insurance specialisms, contact your usual Towergate Insurance Brokers adviser or email TIB@towergate.co.uk.