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P&O Ferries: Why culture is more than a drop in the ocean

The mass sacking of 800 workers by P&O Ferries, without any consultation, has given employment lawyers and legal forums plenty to chew over. Like many of you, I have read numerous accounts analysing whether the company broke the law in its actions and if so whether it had a clear defence for not acting in compliance with its obligations: essentially, were there ‘special circumstances’ which enabled P&O to circumvent the usual legal process?

The issue is complicated by the fact that P&O is a company based overseas and therefore may not be governed by UK employment law, particularly when it comes to things like national minimum wage or even notification to the government about impending redundancies. Then there is the matter of “fire and re-hire” which we covered in our article in November, where we discussed the government’s decision to block a private members bill calling for the practice to be outlawed. More on this in a moment.

Many commentators have pointed out that any potential law breaking was more than an oversight on the part of the P&O board. Rather, P&O was looking for a loophole and found one. If P&O was not governed by legislation, it cannot be answerable in respect of it. But ethics is at play here too, which takes us off in a different direction entirely. In the eyes of many, this is as much a moral issue as a legal one. We can argue that businesses must make hard decisions to survive, but there is another potentially stronger argument that I personally have seen play out to great effect. When companies treat their staff properly, as I believe they must, they are generally more productive and successful. In other words, operating ethically is not something to be considered merely in the context of employment law. It can have a positive impact on business success generally.

I am not for one moment suggesting that if P&O had been nicer to its staff their financial challenges would have miraculously dissipated. Nobody can deny, however, that its reputation and future has been damaged even further by the way it has conducted itself over the recent job losses. Can it really be said that there was no time to consult with its staff? That would have been the ‘proper’ thing to do. Culture (and indeed trust) takes time to nurture and over that time, a company would expect to benefit exponentially from greater loyalty, productivity and ultimately profitability.

Returning to “fire and re-hire”, a recent case (USDAW and others v Tesco Stores Ltd [2022]) saw the trade union USDAW succeed in its High Court battle to stop Tesco proceeding with a ‘fire and rehire’ approach involving 42 workers.

The workers had a guaranteed entitlement to a specific payment described as ‘retained pay’ which protected their rate of pay if they were moved to a different job within the business. Tesco intended to remove this entitlement by firing and then rehiring them.

Consultation failed to reach an agreement and Tesco told the 42 employees that they would be dismissed and offered re-engagement on new terms, excluding the retained pay entitlement, if they did not agree to the change. The High Court found that there was an implied right that this ‘permanent’ contractual benefit would not be removed.

The Tesco case brought up many of the issues which have been raised regarding the P&O sackings, such as the defence of having a good business reason to progress with hire and refire without reaching agreement through consultation. USDAW’s success relied on the fact that the retained pay entitlement had been guaranteed for the duration of the employment rather than being related to the fire and rehire mechanism itself which, although unpalatable and arguably unethical, is not unlawful. 

For me, I like what Grant Shapps had to say in respect of the P&O matter – if one operates in UK territorial waters, you should be obliged to follow UK employment law, or at the least to pay a fair wage. Not of course that this will help the 800!

For a considered approach to employment law for boards and those who sit on them,  contact Richard Port. Email