How not to make people redundant
Following a review into ‘fire and rehire’ practices in the UK, updated guidance was provided by Acas in November 2021 to outline the key principles for employers wishing to negotiate changes to terms and conditions for their employees.
But in March 2022 we witnessed the P&O Ferries scandal when the company sacked 800 employees, without notice or consultation, via a pre-corded video message. Whilst the company did plan to replace them with lower cost workers – in essence a fire and rehire scenario – they actually planned to hire foreign agency workers on pay rates well below the national minimum wage in the UK, making this an even more controversial move.
P&O stated that these agency workers would be paid around £5.50 an hour, inclusive of overtime and subsistence allowance, but the basic rate being offered in their Seafarer’s Employment Agreement equated to £3.94 per hour for a 40 hour week. And there were claims by the RMT union, reported by the BBC at the time, that some Indian agency workers were being paid as little as £1.81 per hour on P&O ferries registered in Cyprus, allowing them to avoid UK minimum wage legislation. The RMT described the plans as ‘one of the most shameful acts in the history of British industrial relations.’
Employers warned against fire and rehire tactics
Whilst some of these details were disputed by P&O, the public outcry and widespread condemnation of P&O’s tactics led to a swift and firm response from the Government. On 29 March 2022, just two weeks after the P&O incident hit the headlines, they announced plans to introduce a new statutory code of practice to protect workers rights in instances of fire and rehire practice (otherwise known as dismissal and re-engagement).
The new Code of Practice, which will build on the guidance issued by Acas in November 2021 and is expected to fall under Section 203 of the Trade Union and Labour Relations (Consolidation) Act 1992, will impose a number of obligations upon employers who wish to change their workers’ terms and conditions.
The Acas guidance already stipulated that dismissal and re-engagement should only be considered as a last resort, where changes are critical to business survival, voluntary agreement to the changes is not possible, and where all reasonable attempts have been made to reach an agreement through genuine and meaningful consultation with affected workers and their representatives. The new Code of Practice will additionally outline some procedural requirements in these circumstances, such as:
a minimum consultation period and minimum number of meetings before a decision is made
notice requirements for such meetings and notice for implementing changes
mandatory information that must be provided to employees as part of the consultation
limited grounds which will be considered reasonable as a business case for the changes.
Those of you who are familiar with redundancy processes in the UK will recognise some of these procedural obligations as being similar to those that must be observed when making redundancies in order to avoid potential unfair dismissal claims. The legal requirement to consult with employees before making redundancies is long established (Employment Rights Act 1996), and failing to do so will almost certainly make any dismissals unfair. P&O’s CEO admitted to MPs that the company broke the law by choosing not to consult on the 800 redundancies, leaving them open to likely tribunal awards for each employee, including protective awards of 90 days pay on top of redundancy payouts.
But in a calculated tactical move to limit potential tribunal claims, P&O offered to pay the equivalent of these awards as part of an enhanced – but time limited – redundancy package, making it unlikely that employees would see much benefit in pursuing legal action.
Another obligation upon UK employers considering a collective redundancy process is the legal requirement to notify the government’s Insolvency Service of the planned redundancies at least 30 days before any redundancies take place. Failure to so is a criminal offence subject to unlimited penalties. P&O made no such notification which looked like a clear breach of this legislation. But Ministers admitted soon after the incident that the legislation (the Trade Union and Labour Relations (Consolidation) Act 1992) provides some exemptions to these penalties which may be applicable to the maritime sector. There was no obvious route for legal proceedings against P&O.
Ultimately, it was a bold and cynical move by P&O which it appears they may have gotten away with, at least from the perspective of serious legal action against them. Their reputational damage is another matter.
The Government has not taken the P&O scandal lightly, and is implementing measures to plug the gaps in UK employment laws and workers rights which emboldened P&O to take the controversial action they did. One is the Seafarer’s Wages Bill, which is currently passing through Parliament and about to reach the 3rd hearing stage in the House of Commons. The bill will ensure that seafarers on ships that regularly use UK ports are paid at least the UK National Minimum Wage for work they do while in UK waters. This will apply regardless of the where the ship is registered, or the nationality of the seafarers.
Another key piece of legislation expected in the coming weeks is the statutory code of practice on dismissal and re-engagement, which is not specific to the maritime sector and would apply to all businesses in the UK who may be considering restructuring their business by forcibly imposing new terms and conditions for their employees – firing and rehiring. This legislation may be supported by another Bill currently at 2nd reading stage in the House of Lords; the Employment and Trade Union Rights (dismissal and Re-engagement) Bill. With widespread support, and considerable pressure on the government from workers organisations and the public, it is likely that this legislation will pass without too much resistance.
Whilst these pieces of legislation and procedural obligations won’t apply to most small businesses who need to make a small number of redundancies or carry out sensible restructuring exercises, there are still important considerations and processes to follow to ensure you do not end up with unfair dismissal claims, particularly with regard to the consultation process.
If you need to restructure your business or are considering making redundancies then get in touch and we will be happy to discuss your business circumstances and support you with finding the best solution and the safest path forward.