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Redundancy: How not to do it

View profile for Chris Dobbs
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Redundancy: How not to do it

In this article, Employment Solicitor Chris Dobbs looks at the unfortunate mass redundancy of P&O employees that hit the news last week.

Chris answers some questions around redundancy consultation, discusses where it went wrong for P&O and looks at the key takeaways for employers.

What happened with P&O ferries?

The story broke live late last week that hundreds of staff on P&O ships were being terminated as part of a restructure.

The manner in which the news was delivered to staff and the media spotlight into which they were thrown would have done little to soften the devastating blow redundancies can have on staff.

It became apparent that this was a planned move; the staff were told by a recorded video message and temporary agency staff were already on standby to replace them.

The story garnered more attention as staff refused to leave docked ships in formal protest.

When does a redundancy arise?

A redundancy situation arises in law when the need for work of a particular kind ceases or diminishes.

This may be because of a restructure or, of course, where the business shuts down entirely.

Can redundancy be unfair dismissal?

Redundancy can be a fair reason for dismissal but employers are often expected to follow a formal procedure, especially in larger-scale redundancy situations where some of the process is a legal requirement.

Do employers have to consult with staff in a redundancy?

All staff potentially at risk of redundancy have a right to be consulted.

Where fewer than 20 redundancies are planned at the same time, there is no formal process.

However, good practice indicates any potentially redundant staff should:

  • Be spoken to
  • Have the situation explained to them
  • Be given the opportunity to present alternatives and give input as to the process and selection

What should a redundancy consultation include?

Where 20 or more staff are being made redundant at once, the employer must do certain things as part of the consultation:

  • Liaise with an employee representative as part of the consultation who may be a trade union representative or someone elected by the workforce
     
  • Consult with them as to:
    • Avoiding redundancies
    • The reasons for any proposed redundancies
    • The ways of reducing the number of dismissals as a result, and
    • Options for reducing the number of affected staff such as redeployment or retraining

How long should a redundancy consultation last?

  • The reasons for any proposed redundancies
  • The ways of reducing the number of dismissals as a result, and
  • Options for reducing the number of affected staff such as redeployment or retraining

How long should a collective redundancy consultation last?

The law states minimum periods these consultations should last:

  • At least 30 days for between 20 and 99 redundancies
  • At least 45 days for 100 or more redundancies

What are the main requirements of redundancy law?

In all dismissal situations, the employer is obliged to act reasonably.

Even a dismissal for a fair reason can still be deemed unfair if the process by which the decision was reached was unreasonable.

What are redundant staff entitled to?

Staff who are made redundant are entitled to their contractual notice, either worked, or paid in lieu and also a redundancy payment protected in law.

The statutory redundancy payment is the minimum which must be paid to all redundant employees, calculated based on their age, length of service and weekly pay.

What are the legal requirements for large scale redundancies?

By law the employer is also required to notify the Redundancy Payment Service of any large-scale redundancy.

Failing to complete the paperwork on time is a criminal offence and can result in an unlimited the fine.

The RPS exists to keep track of large-scale redundancies and protect employees in the event that redundancy payments cannot be made due to the employer’s insolvency.

What claims can arise in redundancy situations?

Below, I’ve outlined some of the potential claims that can arise during a redundancy.

Unfair dismissal claims

A redundancy is a dismissal and so a poorly conducted procedure can give rise to unfair dismissal claims.

This would also be the case where there is not a genuine redundancy situation.

Discrimination claims

Discrimination claims commonly arise out redundancy situations where employees will argue that the selection criteria used was in some way discriminatory.

Care should be taken to ensure that selection criteria and those making the decisions are not open to these kinds of claims.

Statutory claims

As indicated above, redundancy situations also produce potential statutory claims if an employer fails to properly comply with the consultation requirements.

What are the risks for P&O?

P&O appear to have offered the staff redundancy packages.

If every member of staff accepts that, or alternative employment is found, then the company is likely to avoid any tribunal claims.

This may also be the case if the staff are not found to be employees subject to UK employment law.

Will claims be brought against P&O?

However, if claims are brought by employees and a Tribunal finds that the company failed to follow the correct statutory procedures, aggravated breaches can lead to fines of up to £20,000 per affected employee.

Regardless of the legalities, it goes without saying that P&O’s process was morally questionable and has produced a lot of incredibly negative press for the company.

Any company, large or small, planning redundancies will want to factor in the PR attitude as part of their thought process.

Did P&O break the law with their redundancies?

Whether P&O have broken UK employment law will remain to be seen whether by a claim from staff and unions or, perhaps, a criminal prosecution by the RPS. 

However, the situation does highlight the importance of planning and managing redundancy procedures carefully and all the relevant factors to be taken into account.

Where did P&O go wrong?

It was not sensible to inform the staff by recorded video rather than live or, ideally, in person.

P&O is a large and well-known company and given the media attention placed on companies over the last two years who had made similar decisions, the PR element could almost certainly have been better planned.

What can employers learn from P&O’s mistakes?

Employment Solicitor Chris Dobbs says: “Unfortunately, any successful claim from the P&O situation is unlikely to be more than a symbolic one especially if the package offered to staff is as generous as the media is reporting.

However, this situation remains very politically charged and it is important for employers to consider the emotional wellbeing of staff and their families in making these decisions.”

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