A badly managed redundancy process can seriously impact on the business, as P & O Ferries has discovered

The situation involving P & O Ferries’ highly irregular dismissal of approximately 800 employees with immediate effect by video link without prior notice or consultation, has further evolved with the CEO, Peter Hebblethwaite, admitting that P & O deliberately avoided consulting with the appropriate unions, thereby contravening employment law, as it was recognised that no union would tolerate the intended action of P & O Ferries.

Employment law in England & Wales is drafted to protect employees from exactly the situation in which the P & O employees now find themselves - instant dismissal with no opportunity to plan or consider any options.  Giambrone & Partners’ employment law teams recommend that employers should closely follow the law related to redundancy whether making one person redundant or a far larger pool of employees.  Any contravention of The Employment Rights Act 1996 during the course of the redundancy procedure is likely to lead to a claim for unfair dismissal or discrimination, when related to redundancy, and would be difficult for a business to refute.

Given P & O’s elaborate company structures, it is unclear at this stage whether English Law would apply to any employment disputes.

Redundancy means that an employee is dismissed from their job because the role within the business is no longer required, usually due to economic reasons.  The stages leading to redundancy must be scrupulously adhered to and also must be seen to be fair or the business could be exposed to the allegation of discrimination during the course of the selection process.  Discrimination is a protected characteristic under the Equality Act 2010 and there is no cap on the amount that can be awarded to an employee if a challenge is successful.

Daniel Theron, a partner, commented “P &O’s approach seems to have been to spring the redundancies on the staff, swiftly followed by enhanced financial packages that are subject to non-disclosure agreements (NDA) (the costs of which were no doubt factored into the strategy), together with an entire complement of cheaper staff ready to step into the “redundant” roles” Daniel further remarked, “it is hard to say how much reputational damage will impact on P & O but the considerable out-cry and the threats of legal action by the government should there have been contraventions of employment law, may not have been anticipated.”

There are five steps to redundancy starting with a review and the selection process.  Employers would be well advised to have an expert employment lawyer’s guidance throughout the procedure to be absolutely sure that the law is strictly adhered to.  Once it has been established that there is a need for redundancies the business must be able to explain the reasons why this step is necessary.  Every effort should be made to find an alternative to making member (s) of staff redundant if at all possible, such as transferring staff to other roles, reducing hours or temporary lay-off as well as the consideration of voluntary redundancy or early retirement packages.

The next step is selecting the employees who will be in the redundancy pool. This is an extremely critical step, choosing an employee with a protected characteristic or appearing to select a person without any viable justification can result in a case being brought before the employment tribunal.  An employer can consider:

• An employee’s standard of work and skills
• Their disciplinary record
• The importance of the role

Some businesses employ a basic “first in, first out” rule which on the face of it may appear to be fair but in fact, the employer could be accused of discrimination depending on whether the “last in” employee has any aspects that could lead to an allegation of discrimination.  Other businesses use a points system related to their contribution to the business, disciplinary or sickness record or general performance in the workplace.  Employees selected for the redundancy pool must be informed in advance in writing.

There follows a period of consultation with each employee which must not just be “lip-service” but should explain to the employee the reasons for the redundancies and why they are in the redundancy pool. It is vital to have an objective redundancy selection criteria which is accurately and fairly applied throughout. The discussions should be seen to be a significant attempt to consider the responses received from the employees.

If you are making 20 or more employees redundant a union member or other appropriate employee representative should be present at the discussions on the employees’ behalf.  A reasonable amount of time should be allowed before the eventual redundancies, varying between 30 days and 45 days depending on the number of employees to be made redundant. 

Daniel Theron pointed out “employers should not give notice to any of the staff selected for the redundancy pool at this stage.  The appropriate representatives should be provided with particular information in collective redundancy procedures, including, amongst other things, the reasons for the redundancies and your method of selection and how the procedure will be carried out.”

Once you have reviewed and considered the employees' responses and made your final selection you can then give the employees notice and inform them of your decisions together with their notice pay and any statutory redundancy pay as well as informing the employees if they will receive payment in lieu of notice.  It is advisable to have face-to-face meetings, with confirmation in writing.  

Giambrone & Partners’ employment law team is highly experienced in dealing with redundancy procedures and ensuring that there are no breaches or infringements of employment law.

For any information regarding a redundancy procedure please contact  Daniel’s clerk, Sam Groom at SG@giambronelaw.com or please click here