P&O's Redundancies​

By Jake Rickman​

What do you need to know this week?

Last Thursday, UK-based ferry operator P&O Ferries informed 800 of its crew and staff over a pre-recorded video message that they were all being replaced by third-party agency workers and therefore were to be terminated via redundancy, effective that day.

A redundancy is where an employer terminates an employee’s position out of 'economic necessity'. Unusually, P&O’s employees were not given any notice of the redundancy, though there are reports they have been offered “enhanced” redundancy packages, but the terms of this package are unclear.

In a press statement, P&O’s management cited the company’s poor performance in recent years as justification for the redundancies, and that without the “swift and significant changes” there would be “no future for P&O Ferries”.

The Rail, Maritime and Transport union (RMT), which represents many of the terminated employees, later claimed that P&O had hired agency workers from India on less than £2 an hour.

Why is this important for your interviews?

In the best of cases, redundancies are a lamentable action taken by employers that feel they cannot justify keeping on certain staff and therefore must terminate their employment out of economic necessity.

From this perspective, it is clear P&O is in dire straits by just looking at their company accounts:

In 2021, the company reported an operating loss of £100m and in 2020 this figure was £105.3m. Its earnings before interest, tax, depreciation, and amortization — commonly called EBITDA, which is a useful way to evaluate a company’s cash flow and measure its financial position — was negative £25.6m in 2020, compared to positive £84.4m in 2019. Finally, P&O is restructuring its bank debt, which totals £117.7m as of 31 December 2020.

But even where there is a case of economic necessity, under UK and retained EU law, there are certain rules in place that employers must follow. This is because redundancies effectively terminate an employee through no fault of the employee’s actions,

The usual course of action is that employees are expected to undertake a “redundancy consultation” process, which is supposed to create a dialogue surrounding the possible termination of the employee’s position that the employee can participate in.

Where 100 or more redundancies are proposed, the employer must begin this process at least 45 days before the dismissal is to take effect. The company must also notify the Secretary of State of their intent at least 45 days before dismissal.

By most accounts, it seems P&O did not follow either of these steps, which has left many commentators scratching their heads (to say nothing of the outrage that has ensued).

How is this topic relevant to law firms?

P&O may have committed several employment offences, which may cost the company a substantial sum of money to defend. Additionally, its management’s actions have invited the public’s scrutiny, which may cost it contracts and hinder its future performance. As a result, it will almost certainly need legal advice.

P&O is currently represented by Pinsent Masons.


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