[co-author: Edward Wilson]
P&O Ferries (“P&O”), a British shipping company, recently hit the headlines in the UK when it abruptly terminated the employment of almost 800 workers without prior warning or consultation, in some cases via Zoom, as part of a restructuring plan. Media coverage slammed the decision as grossly unfair, particularly because it was likely to have violated UK laws that require consultation with unions and workers in redundancy situations involving larger groups of employees. Government ministers, including Prime Minister Boris Johnson, have commented on the case and called on P&O’s CEO to resign. The episode has brought into focus the importance of carefully weighing the financial, legal and reputational consequences of employment-related decisions.
Although it’s impossible to learn all the facts from media reports, it appears that P&O made a calculated decision that dismissing workers without prior notice would avoid potential disruption caused by a drawn-out consultation procedure and they believed that without taking drastic action the company could have fallen into administration with the loss of 3,000 jobs. As compensation, it appears that P&O will offer a more generous severance package to dismissed workers to take into account the lack of consultation, including a payment that represents the damages payable to employees for failing to consult.
In termination situations, it is not unusual for employers to make decisions on how to proceed based on an assessment of legal and financial risk, and sometimes this means not necessarily following all procedures to the letter. In many cases, a monetary value can be placed on that risk when considering whether to adhere to all legal obligations, such as employee contractual entitlements, statutory obligations, and potential damages in the event of claims. But the public relations fallout both within the organization and with the wider public can be far more difficult to predict and control. Although it might be the case that the terminated P&O staff could be financially better off (or at least no worse off) under the proposed severance terms than if the consultation process had been followed, the company is now embroiled in a public relations firestorm which may last longer and cause more damage.
The episode stands as a useful example that although an employment decision may appear to make financial and business sense, the negative legal and reputational consequences of such a decision might in some cases far outweigh other benefits.
*Edward Wilson is a Trainee Solicitor at our London Office
