Experts: P&O Ferries’ exposure of U.K. law weaknesses sets dangerous precedent

On March 24, the company’s chief executive, Peter Hebblethwaite, told U.K. lawmakers that, as part of P&O’s plan to restructure the company to keep it financially viable, it had knowingly broken the law by refusing to consult with unions or employees before culling the workforce.

Within days of Hebblethwaite’s widely criticized Parliamentary appearance, maritime authorities prevented two P&O ships from putting out to sea over safety fears as the new crews had little or no sailing experience.

The episode has united U.K. politicians of all parties to condemn the company’s actions, call for legal sanctions, and consider whether the law needs to be reviewed and overhauled to prevent others from following suit.

One problem: P&O’s actions appear to be largely legal, and where the company might have broken the law, the sanctions are so light that other companies could reasonably think it is worth ignoring the legislation as a price of doing business.

“In the United Kingdom, very few employment laws have criminal penalties, which means writing out big checks for unlawful and quick dismissals may settle civil liabilities while the business remains afloat,” said Tim Gofton, a senior associate in the employment team at law firm Royds Withy King.

Martin Williams, head of employment at law firm Mayo Wynne Baxter, said successive U.K. governments are mainly to blame.

“If legislation does not cover all intended situations, that is a failure on the part of the legislation,” he said. “Organizations cannot be expected to act in accordance with a provision that has not been properly expressed in law.”

Kate Palmer, human resources advice and consultancy director at employment law firm Peninsula, pointed out it is likely P&O is subject more to international maritime laws than U.K. employment laws, which means it—as well as other companies in the sector—can pay an ordinary seaman rate of just $1.99 per hour as set out by the International Transport Workers’ Federation and International Labor Organization (around one-sixth of the minimum wage for U.K. employees aged 23 and over).

P&O has claimed since its ships are registered in Cyprus, Bermuda, and the Bahamas and staff were employed by a company registered in Jersey, it has not broken U.K. laws regarding collective consultation with trade unions or employees. The company has also maintained it has not broken any laws by failing to notify the competent authorities of the relevant flag states in good time before the dismissals (it did so 24 hours in advance).

Legal experts argue, however, that since the vessels operate from U.K. ports and in U.K. waters while staff are U.K. citizens and paid in sterling, both ships and workers are sufficiently connected to the country for U.K. laws to apply.

Even so, said Joseph Lappin, head of employment at law firm Stewarts, the penalties for noncompliance are little deterrent. For example, successive U.K. governments have not extended the criminal penalties for failure to notify, so the company will probably evade an unlimited fine.

“P&O’s failure to collectively consult gives rise to an award of compensation of up to 90 days gross pay for each crew member. However, many will ask whether such a flagrant disregard for the law should carry more than a financial penalty,” said Lappin. “There will be calls for a change to the law so that unions and employees can ask the courts to automatically stop companies following in P&O’s footsteps.”