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Building worker power

Essays on collective rights 20 years after the Wilson and Palmer case established the right to be represented by a trade union
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Research and reports
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Taking the rule of law seriously: the P&O Ferries scandal and the need for a Labour Enforcement Act

By Professor Alan Bogg

How does a discussion of the P&O Ferries scandal fit in a collection of essays dedicated to the 20th anniversary of the landmark decision in Wilson and Palmer v United Kingdom?

There are some similarities, of course. Both disputes have a maritime dimension, with the Palmer case originating in a union recognition dispute at Southampton docks. Beyond this, however, there are obvious differences.

Wilson and Palmer both concerned situations where there had been a withdrawal of union recognition by the employers.

Financial bribes had then been offered to individual employees to persuade them to sign new ‘personal contracts’ purged of collective pay-setting. This provided a way of smoothing the transition from collective bargaining to individualised pay determination.

At that time, UK law provided no legal remedy either to employees or the union itself to respond to the employer’s discriminatory practices. It required a trip to Strasbourg, prompting a legislative change in the Employment Relations Act 2004, to finally address the lacuna in protection.

In P&O, by contrast, the employer implemented peremptory mass dismissals in breach of the notice and consultation requirements for collective redundancies.

The employer alleged that it had given notice to the competent authorities in the flag states of the affected vessels (though it had not complied with the timing requirements for notification).

For the employer, it was imperative that the union and employees had no inkling of the plan so that there was no time to organise strike action to challenge the mass redundancies.

In the meantime, the employer had engaged a completely new workforce employed through agencies that were not subject to basic statutory rights such as the national minimum wage.

It is very likely that P&O had chosen to switch from a unionised workforce covered by collective bargaining to a non-unionised workforce paid at significantly lower rates. It was a brutal instance of derecognition, relying on the fist rather than the velvet glove of Wilson and Palmer.

[P&O] was a brutal instance of derecognition, relying on the fist rather than the velvet glove of Wilson and Palmer.

The firm had also prepared financial settlements offered to each employee in order to buy off any litigation. Measured against the financial remedies likely to be awarded in tribunal, the offers were attractive. Nearly every employee (bar one) accepted the settlement agreements.

This represented an extreme variant of fire-and-rehire in the use of dismissal powers to downgrade contractual terms. It was an extreme case because there was no rehire: the new workers were effectively exiled beyond the territorial scope of the most basic employment protections.

It is also revealing that the P&O employees subject to French and Dutch legal protections, with its superior remedies for labour breaches, were not targeted in the same way.

Attack on trade unions

Despite superficial differences, P&O is a particularly grim example of the attack on trade unions in Wilson and Palmer. On this occasion, there was no messing around with the niceties of new contracts and enhanced pay offers. Instead, a unionised workforce was dumped and replaced overnight with a non-unionised workforce. 

There was no attempt to comply with the law. Financial sweeteners were used by the firm to buy itself out of an embarrassing court appearance. It was derecognition on steroids. 

It made Wilson and Palmer look like the gentle noblesse oblige of a bygone era.

Summoned to appear before parliamentary select committees, the chief executive of P&O, Peter Hebblethwaite, did not attempt to argue that the actions of the company were lawful. It would have been nonsense to do so. An uncomfortable few hours in Parliament was no doubt also priced into the commercial decision to act in this way.

The dismissals were unfair under the relevant legislation. The compensatory award for unfair dismissal is capped to ensure a fair balance between the interests of employees and the needs of businesses. The failure to consult would also have attracted a penal ‘protective award’. This is capped at 90 days’ pay.

“The effect of these statutory caps is to make law-breaking predictable for the calculating wrongdoer. The exact price of the rule of law was no doubt contained in a complicated spreadsheet drawn up by [P&O’s] lawyers in the lead up to the sackings.”

Given the likely profits resulting from breaching the law, P&O simply decided to ignore its legal obligations.

There was much huffing and puffing in Parliament about injunctions and making P&O obey the law. By the time of Mr Hebblethwaite’s appearance, of course, this was really just posturing and handwringing. There was nothing left to enjoin through an injunction because most shell-shocked employees had already signed the settlement agreements.

The game was over, and P&O knew it. And Mr Hebblethwaite’s handsomely remunerated contrition was no comfort to the many hundreds of employees who had been dumped by the company.

Needed: a Labour Enforcement Act

The real scandal of P&O is political.

It is the fact that successive governments have acquiesced in a situation where the rights on the statute books are regarded as optional by employers who are determined to break the law.

When rights enacted by Parliament are openly flouted by law-breakers, democracy is undermined. Respect for the rule of law is also eroded.

It is a constitutional imperative that this is addressed through a Labour Enforcement Act. The Act should contain the following measures:

  1. Where there are caps on statutory awards, the court should have a power to set aside the statutory cap and award punitive damages where the employer has made a calculation of the profits resulting from law-breaking and made a deliberate decision to breach the law. This would be a statutory codification of an existing basis for awarding punitive damages at common law in Rookes v Barnard.
  2. The remedy of interim relief, which is currently available for alleged trade union dismissals, should also be available where there has been a failure to consult in respect of collective redundancies or transfers of undertakings.
  3. Where there has been a failure to notify the Secretary of State or the competent authority in the flag state, or a failure to do so in accordance with the requisite time frames, any purported dismissals should be null and void. The statute should also clarify that the failure to notify the competent authority in the flag state is a criminal offence. Where there has been a calculated failure to notify in accordance with the statute, the court should have the power to impose a custodial sentence on managers involved in that decision.
  4. The statute should clarify the existing scope for accessory liability where a secondary party has intentionally assisted or encouraged a primary wrongdoer who has breached legal duties. This could extend the reach of criminal liability to include those who have orchestrated the wrongdoing, such as the senior executives in companies that exercise significant corporate influence over the primary employer’s decision-making.
  5. Where an employer has deliberately breached its statutory duties, procedural and substantive restrictions on lawful strike action should be relaxed. For example, the prohibition of secondary strike action effectively insulated P&O from any industrial action because it had dismissed its unionised workforce. In these circumstances, there should be a separate and more permissive regime to empower trade unions to undertake ‘enforcement’ strike action against the employer. This would include secondary action.

The great legacy of Wilson and Palmer was the remarkable fortitude of trade unions and workers in pursuing legal action and securing significant improvements to the legal framework.

P&O is a salutary reminder that there is much that remains to be done.

Despondency was not an option for David Wilson and the NUJ.

On the 20th anniversary of this remarkable chapter in the story of labour law, we must ensure that 20 years from now we will be celebrating the anniversary of the Labour Enforcement Act.

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