P&O sackings show why laws to protect workers are so important

When global companies are unconstrained by law, they are free to treat their workers like commodities.

Commentary icon21 Mar 2022|Comment

Keith Ewing

Professor of Public Law, King’s College London

In the first of his three part discussion on the P&O crisis, IER President Keith Ewing looks at the underlying issues of the sackings.

I

Conservative and Labour politicians at Westminster have been queuing up in Parliament and in front of mics to express their outrage at P&O Ferries for the ‘dismissal by zoom’ of 800 seafarers.   Some seem genuinely bewildered about how such things can happen, and others have gone so far as to suggest the need for emergency legislation, though to do what is unclear.

But as well as point the finger at the employer, some of these politicians might also want to look in the mirror and ask themselves about their own responsibility for the company’s announcement.  This is yet another example of why labour law is important and the folly of those who trust business to do the ‘right thing’.   It is what happens when global companies are unconstrained by law, and free to treat their workers like commodities.

II

So, what is the legal position?   First, based on an EU Directive employers are required by law to inform and consult employee representatives of impending redundancies, to help avoid or mitigate the redundancy, or to soften the blow when it happens.   Initially under Labour the consultation was to begin in some instances 90 days before the dismissals, but has since been reduced by successive Conservative and Coalition governments to 45 days.

The legislation provides that in ‘special circumstances’, the employer may be excused from the obligation to inform and consult to the full extent required by the law.  But this defence has been narrowly applied by the courts and may not be available to P&O, as the circumstances have been explained in the press.  That being the case, the remedy for failing to consult is a financial one, by way of what is called a ‘protective award’.

An application for a protective award may be made by a union to an employment tribunal on behalf of all the affected employees.  The tribunal has the power to make an award to these employees for the ‘protected period’, which may not exceed 90 days.  The protective award is based on actual salary, and is to be assessed on a punitive basis, especially in cases where there has been a blatant failure to inform and consult.

Nevertheless, for a big company, this is presumably small change.  If it is a profit-making company (and that seems to be contested in the case of P&O, though apparently not the global group of which it is a part) the cost is likely also to be tax deductible, along with the fees of the lawyers and others on whose advice they are acting.   In other words, the cost of non-compliance in these cases is a burden on the taxpayer.

Crucially, there is no power on the part of employment tribunals or any other judicial body to order the company to stop the dismissals until information and consultation obligations have been complied with.   Nor – as there also should be – is there a power to hold directors personally to account with criminal penalties in the event of a company’s failure to comply with the statutory duties to inform and consult employee representatives.

III

Secondly, and also based on obligations originally arising under EU law (capable since Brexit of being removed or diluted further on the whim of the government), employers have a duty to notify the government of impending redundancies, so that the government can take social measures to prepare for the consequences of mass dismissals in any particular locality and set in train arrangements for people looking for new jobs.

As in the case of notice to employee representatives, the notice should be given when the employer is proposing to dismiss and should be given before the first dismissal notices are issued.  At this stage it remains unclear what information has been supplied by the company  to ministers.  However, if the vessels to which the redundancies relate are registered overseas, there may be no duty to inform the British government at all.

But even if the duty to inform the government does apply and has not been complied with, ministers do not have the power to require the employer to desist until such time as the information and consultation procedures have been exhausted. Conversely, if the duty has been complied with, ministers have no power to veto the employer’s decision to dismiss and replace the workforce.

The penalty for failure to notify the government is a fine in the magistrates’ court.  This may now be unlimited, but it is for the Secretary of State or someone nominated by him to decide whether to prosecute.   It will be recalled that the Information Commissioner imposed a £20 million penalty on British Airways for a data breach in 2020.  Workers’ jobs are surely worth at least as much as their data.

One point worth highlighting is that unlike the failure to consult employee representatives, the failure to notify the government raises the possibility of personal criminal liability for any ‘director, manager, secretary or other similar officer of the body corporate, or any person purporting to act in any such capacity’.   It remains unclear whether this applies in the P&O dispute, though the penalty is potentially formidable if it is the same as for companies.

But the fact that provision is made for the criminal law to be used in this way signals the importance of the obligation to give proper notice, even though it applies only where any failure of the company ‘is proved to have been committed with the consent or connivance of, or to be attributable to neglect on the part of’ the officers in question.   Much more significant for the future would be strict personal liability in egregious cases.

IV

In the meantime, however, an employer who dismisses summarily may also have to pay wages in lieu of notice (up to maximum of 12 weeks depending on length of service); pay redundancy payments to those with sufficient length of service (two years or more); and perhaps also face unfair dismissal proceedings from the employees who have been dismissed without due process.

But given that in this case the company has said that it is prepared to settle on terms in excess of the statutory minimum requirements, these obligations are not likely to be a problem and the costs are presumably already ‘priced in’.   For whatever the cost of getting rid of staff in this way, it needs also to be recalled that there is a significant prize for those who are able to get away with doing so.

Press reports suggest that in the P&O case the replacement crew will be supplied by overseas employment agencies.   One way or another, there is unlikely to be protection for these workers under the Agency Workers Regulations.   More importantly, if they are overseas nationals who are not ordinarily resident in the United Kingdom, they may not be entitled to the national minimum wage (though employers may choose to comply voluntarily).

Welcome to Britannia Unchained.  Welcome to the world of corporate social ‘responsibility’.  And welcome to the ugly consequences of globalisation, free markets, and dysfunctional labour laws.

This is a corrected version of an article which first appeared in the Morning Star on 19 March 2022, amended as fresh information continues to be made available.

This is the third in a series of articles by Professor Keith Ewing on the P&O crisis. You can read part two here and part three here.

Keith Ewing

Keith Ewing is Professor of Public Law at King's College London. He has written extensively on labour law including recognition procedures and international standards. He is also the President of the Institute of Employment Rights