BEERG Perspective - P&O Ferries and Collective...

Vince Toman of Lewis Silkin writes: This piece considers the legal implications of P&O Ferries’ decision to terminate the contracts of 800 of its UK employees with immediate effect, via a recorded video message.

Under UK employment law, where an employer is proposing to dismiss as redundant 20 or more employees at “the same establishment” within a 90-day period, it must inform and consult with potentially affected employees’ “appropriate representatives”, this is called collective consultation. This requirement also applies to projects to change terms and conditions of employment if these changes are to be made by way of a “fire and rehire” exercise. Section 188 of Trade Union and Labour Relations (Consolidation) Act 1992 (“TULRCA”)

For the purposes of P&O Ferries, each individual vessel is an “establishment”. 

The “appropriate representatives” for potentially affected employees are a trade union’s representatives if the employees are of a description (i.e. it is irrelevant whether the employees are personally union members or not) in respect of which the employer recognises the union. It is understood that P&O Ferries had a recognition agreement with the RMT among other unions.  

There is no obligation on an employer to reach agreement with the appropriate representatives in relation to its proposals to dismiss employees. However, it must nevertheless inform and consult with a view to reaching an agreement.

There is a possible defence for employers who cannot comply with their legal obligations to inform and consult. Section 188(7) TULRCA. This defence can be relied upon where “special circumstances” render it not reasonably practicable for the employer to comply with its legal requirements, however the employer must take all such steps towards compliance with that requirement as are reasonably practicable in the circumstances. 

Where the decision leading to the proposed dismissals is made by a person controlling the employer (directly or indirectly i.e. a parent company), a failure on the part of that person to provide information to the employer shall not constitute “special circumstances” rendering it not reasonably practicable for the employer to comply with its legal requirement to inform and consult.

Due to the preparations carried out by P&O Ferries in advance of the announcement, it is highly unlikely that they could reply upon special circumstances defence. 

As such it looks as though P&O Ferries has not complied with its information and consultation obligations under UK employment law. This means that P&O could face a claim for a protective award of 90 days uncapped salary for each dismissed employee in addition to compensatory unfair dismissal awards and redundancy payments. It is worth noting that the UK employment tribunals also have the power to order the employee is reinstated in the role if there is a finding of unfair dismissal.

There is a legal requirement for most employers to issue a HR1 document setting out the number of potential dismissals and when those dismissals will take effect (section 193 TULRCA). It is a criminal offence not to issue HR1 form although there have been very few such prosecutions. It is not known whether a HR1 has been issued. However, these are not normal circumstances. It is understood that these vessels are registered under a flag outside of the UK.  

This means that P&O Ferries may not have been under an obligation to inform the UK government and provide an HR1 form. Instead, P&O are required to inform the competent authority of the state where the vessel is registered, Section 193A of TULRCA. 

It is our understanding that the vessels are registered in Cyprus and therefore subject to the EU 2015 Seafarers Directive (as amended). P&O Ferries may already have already informed the Cypriote authorities although this has not yet been confirmed. It is worth noting that the 2015 Directive was amended to allow video conferencing as a way of holding Europe Works Council meetings and hold consultation meetings with seafarers’ representatives whilst they are at sea.  My view is that a recorded video messages does not constitute consultation under the Seafarers Directive. 

It is now known that P&O Ferries did inform the UK government of its proposal to dismiss its UK staff in advance of informing the trade unions and/or its employees (although we do not know if this was by way of an HR1 form). This decision may have been taken for several reasons, including commercial contracts between the UK Government and P&O as well as the potential of criminal conviction and unlimited fines under section 194 TULRCA if it was found that section 193 of TULRCA applied.

It has been reported today that the crew members have been offered 6.5 months’ salary under Settlement Agreements which would prevent crew members from enforcing their employment rights in the employment tribunal totalling £38 million. However, it should be noted that a claim for a protective award in relation to the failure to consult is not capable of being settled under a settlement agreement and the crew members could bring this claim even after having signed a settlement agreement. 

National Minimum Wages Act 1998 (“NMW”)

The reason given for P&O Ferries’ decision to dismiss the employees is the cost of using UK crews, although this of course does not explain why they chose to dismiss the crew members without collectively consulting with their representatives, contrary to UK employment law.  The UK’s NMW would operate so as to prevent any new workers being employed on wages below the NMW. But the NMW does not apply outside the jurisdiction of the UK. The NMW legislation only applies if the vessel is operating between UK ports such as Scotland/England and Northern Ireland.

The position prior to October 2020 was that individuals working or ordinarily work in the UK, as well as those employed on UK registered ships were entitled to NMW.  Additionally, the NMW was payable to those individuals who ordinarily work on oil and gas rigs or offshore renewable installations based in UK territorial waters (the area of sea 12 miles around the UK) or on the UK continental shelf. 

The NMW (Offshore Employment) (Amendment) Order 2020 was made law on 1 October 2020. This legislation extended the NMW protection to any seafarers working on any vessel working domestically in the UK territorial waters or on one port voyages, from UK ports to the UK Continental Shelf or the UK Exclusive Economic Zone

The explanatory memorandum to the NMW (Offshore Employment) (Amendment) Order 2020 states:-

“The legal working group recommended that the existing legislation should be amended to extend the protection of the minimum wage to all seafarers working on any vessel working domestically in the UK territorial waters or on one port voyages, from UK ports to the UK Continental Shelf or the UK Exclusive Economic Zone. This Order seeks to implement those recommendations to the territorial sea and to those working to support the offshore sector of the UK Continental Shelf. A one port voyage is where a vessel leaves and returns to the same port without stopping at another port. Examples would be offshore supply vessels servicing UK offshore installations or a fishing vessel landing its catch in the same port from which it sailed.”

However, the NMW (Offshore Employment) (Amendment) Order 2020 does extend the right to NMW to seafarers on vessels exercising “a right of innocent passage” and those exercising the right of “transit passage”. This means that seafarers on vessels which leave a UK port and go to a third country, such as France, before returning to a UK port are not protected under the NMW. Which, of course, is what cross channel ferries do every day. 

It should be noted that P&O Ferries does not appear to have dismissed any of its French employees.

What is evident from P&O Ferries actions is that it has united those on both sides of UK politics divide who have expressed outrage. However, it is never a good idea to change laws based upon a single event, but this incident has exposed some areas which require clarification/amendment. I have not considered whether the employment of the relief crews comply with current UK immigration laws particularly around the threshold for earnings.  This is an area for others to comment on.