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EMPLOYMENT LAW – THE RO-RO BACKWASH – Print – Issue 212 – JUNE 2022 | Article of the Week

EMMA BARLETT, PARTNER & WINNIFRED SARFO-GYAMFI, ASSOCIATE - CM MURRAY LLP

Claiming it would ‘not be a viable business’ if it did not take action, on 17 March 2022, P&O sacked 800 of its crew members via a pre-recorded video message, without consultation or notice. Unlike other household names which have been heavily criticised for announcing mass redundancies in recent years, P&O’s stated intention was not to rehire their workers on new contracts, but to replace them with agency staff who would be paid less than the UK national minimum wage (NMW).

Collective redundancies have, unfortunately, been commonplace in recent times and, even when the employer has complied with the collective consultation obligations, the practice – nicknamed ‘fire and rehire’ – has been heavily criticised. Under the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) ss188-198, if an employer wishes to make redundant 20 or more employees at one establishment (the local unit or entity where workers are assigned to carry out their duties) within a period of 90 days or less, the employer is required to inform and consult with recognised trade unions (if there are any) or the appropriate representatives of employees who may be affected by the proposed redundancy dismissals or by measures taken in connection with those dismissals. ‘Redundancy’ under TULCRA, is given the broadest meaning – it includes the traditional concepts of redundancy under the Employment Rights Act 1996 (ERA), but will also include dismissals, which may be regarded as being for “some other substantial reason”. Given that the roles of the crew being dismissed are still required by P&O – but are roles which P&O are hoping to fill on lower pay – the dismissals are not redundancies in the ordinary sense, under the ERA. The minimum consultation period in these circumstances is 30 days before the first dismissal takes effect, increasing to 45 days if the number of redundancies is 100 or more. Employers are also required to provide 30 or 45 days (depending on the number of dismissals) advance written notification of such consultation, prior to the first dismissal, to the Secretary of State (via the Insolvency Service) and the Redundancy Payment Service. Failure to do so without good cause may result in prosecution and a fine, on summary conviction, for the company and/or officer of the company. The Government claimed that such notification had not been received, it seems that the Government had just a few days’ warning. Consultation is part of a fair redundancy process, which should follow a warning of redundancy and should be undertaken with a view to allowing employees a reasonable opportunity to understand the proposed redundancy impacting their role and an opportunity to ask questions and consider alternatives to redundancy. P&O asserted that it had no alternative but to make the redundancies, in order to continue trading and that no union would have accepted the planned changes. While this might be offered in mitigation, it is no defence to a breach of the obligation to inform collectively under TULCRA.

The ‘fire and rehire’ practice incorporates TULCRA’s collective consultation process but has, more recently, been used to remove and replace employment contracts that are either no longer fit for purpose or are uncommercial. For example, contracts containing expensive shift patterns, which are no longer required. The collective consultation process allows affected employee representatives the opportunity to mitigate the impact of the proposal by suggesting alternatives and many employees accept the alternative employment contracts offered, which may or may not be less favourable. It is usually a measure of last resort. Employers could, alternatively, seek to agree new terms with their employees by consent (and usually with an element of compensation to buy out the outdated terms). Alternatively, employers could consider introducing different tiers of contracts, leaving those who will not consent to changes on their existing terms and, instead, introducing the new contracts to those who join or to existing employees moving into new roles within the business voluntarily. These alternatives are not always possible, but will not trigger the collective consultation obligations if the employer does not intend to terminate employment.

The cost, however, of making collective redundancies can be significant. Firstly, the employer must continue employment during the minimum collective consultation period as well as participate in the process. Employees who are made redundant are entitled to pay in lieu of notice (note that contractual entitlement may be higher than statutory), pay in lieu of accrued untaken holiday and, if they have more than two years’ service, a statutory redundancy payment. Few employers have policies with enhanced redundancy payments these days, but some will have to consider that too. However, meeting contractual and statutory payments may not be the end of the story, as if the dismissals are fundamentally unfair, eligible employees may expect additional compensation for loss of employment over and above these payments. In the present case, it would appear that the roles are not redundant under the statutory definition in the ERA; the dismissals appear to be for “some other substantial reason”, namely, to replace the individual with a lowerpaid crew member, which may not be a fair reason to dismiss, irrespective of the fact that no fair process was followed prior to the dismissal taking effect.

It is worth noting that if the majority of crew dismissed share a particular characteristic that is protected under discrimination legislation, the dismissals may also contravene indirect discrimination legislation for which separate claims and compensation could follow. Certain employees may also have been eligible for statutory maternity pay at the time of their dismissal by P&O. Maternity legislation also gives certain employees preferential treatment by being offered alternative roles if they are being made ‘redundant’, which may give pregnant employees – or those on maternity leave – additional claims against P&O if they are not offered alternative roles. No doubt, some of these will play out in the public domain in due course. P&O appears to have offered to buy out these claims, offering the dismissed crew an ‘enhanced compensation package’ subject to signing a statutory settlement agreement, which would include a waiver of claims and complying with its full terms and conditions. Not all employees have as yet accepted the enhanced offer; the alternative is to bring the above two claims in the employment tribunal with the assistance of their trade union. Even if they are supported by their union and, therefore may not incur legal costs in doing so, those employees will have to weigh up the emotional cost of pursuing the claim and the drain that tribunal delays can bring. Clearly, the unions will want to pursue as many claims as possible, sending a powerful message in to the market.

Employees with more than two years’ service at the point of dismissal may, however, want to seek reinstatement. This remedy is ordered in less than one percent of unfair dismissal cases, although it is not often sought. The cost to the employer would include an award of back pay as well as a protective award. If the employer rejects a reinstatement order, it could alternatively face further cost penalties of between 26 and 52 weeks’ pay, subject to current statutory limits. The Government has also taken a strong stance, referring to P&O Ferries’ actions as ‘a national scandal’. In a letter to its CEO, the Secretary of State expressed the Government’s anger and disappointment at the way P&O handled the redundancy, especially since it had received taxpayers’ support from the furlough scheme. Unions have been calling for the Government to introduce legislation preventing ‘fire and rehire’ practices by employers which, to date, has been resisted. However, a primary concern for the Government now is to ensure that UK employees working in British waters are still paid NMW, which is what P&O Ferries appeared to be attempting to avoid.

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