P&O dismissed 800 employees, without consultation, and replaced them with agency workers reportedly paid less than the UK National Minimum Wage (NMW).

There has been public and political outcry at the situation and widespread frustration that P&O have taken a deliberate decision to flout the law. However, the reality is that P&O’s approach is not unique. Employers take calculated risks and these may include a decision to not comply with strict legal requirements.

It is perfectly possible that the financial savings involved in avoiding lengthy consultation can mean that taking a risk makes commercial sense, especially when you have been able to quantify the maximum financial exposure presented by claims which can instead be settled. An employer may be punished for a failure to comply with UK employment law, but they are not actually prevented from deciding to act in breach regardless.

The government has made a number of announcements to try to deal with the P&O situation specifically, but also aimed at making decisions to flout employment laws more costly to employers. Many of the announcements are specific to ferry operators, for example to ensure compliance with NMW. Grant Shapps has also called for Peter Hebblethewaite, the P&O Ferries chief executive, to be disqualified as a director due to sharp practice.

Of more general application and interest is the announcement of a new Statutory Code, which will allow Employment Tribunals to take manner of dismissal into account, and some ‘teeth’ in the form of uplifts to compensation for non-compliance.

Our previous blog confirmed the requirement to collectively consult in largescale redundancy situations – which applies when 20 or more redundancy dismissals are proposed at one establishment within a 90 day period.

Whilst we do not know all the details of the P&O situation, the government has taken this failure to consult extremely seriously. The proposed new Statutory Code on the practice of dismissal and re-engagement – commonly known as “fire and rehire” – will presumably apply to redundancy situations as well, but we await this detail.

The press release states that  “the government has always been clear that using fire and rehire as a negotiating tactic is completely unacceptable, and we expect companies to treat their employees fairly.”

The new Code will reportedly:

• clamp down on controversial tactics used by “unscrupulous employers” who fail to engage in meaningful consultation;
• provide clarity on how to hold fair, transparent and meaningful consultations on proposed changes to employment terms; and
• include practical steps for employers to follow.

Employment Tribunals will be able to take the Code into account when considering relevant cases, including unfair dismissal and, just like the ACAS Code of Conduct, the courts will have the power to apply an uplift of up to 25% of an employee’s compensation if an employer unreasonably fails to comply with the Code where it applies.

It appears that the aim of the Code will to be to act as a deterrent, particularly to those employers seeking to use the threat of fire and rehire as a negotiation tactic. Ultimately, it will not prevent deliberate flouting of legal requirements on consultation, instead just increasing the financial costs that would need to be taken into account in making such commercial decisions.

There has been a suggestion from MPs that injunctive relief should be available to enforce a mandatory 90-day consultation where that has not, or will not, take place. If this suggestion is taken forward it will do more to prevent another P&O situation than any other measure announced so far. It would also change the landscape of employment law as we know it, effectively preventing dismissals in breach of legal requirements.

P&O’s actions seem to have changed the future of employee consultation. Probably not the outcome they were seeking.

We will provide an update on the Statutory Code as soon as we have more information, but in the meantime, if you are planning large-scale redundancies, or dismissal & re-engagement situations, please contact your legal advisory team.