Why did P&O not fear political blowback over mass sackings?

The British government has, possibly belatedly, found its moral compass over ferry company P&O’s mass sackings.

Ministers have professed themselves “angered”, “disappointed” and “appalled” over the company’s view it could “in good faith” decide against doing decent things such as giving employees notice they were about to be replaced by cheap agency labour.

They have busied themselves writing sternly-worded letters (not always to the right person). The Department for Transport is reviewing all contracts with P&O Ferries and owner DP World; "there can be no doubt that the government is closely considering its relationship with your organisation", in the words of transport secretary Grant Shapps. Kwasi Kwarteng, the business secretary, has issued a questionnaire to get to the bottom of things.

Put aside questions over the legality of P&O’s actions, it should have talked to the unions and didn’t. It should have given employees notice and didn’t. The company was worried about blowback from employees: it “took the view . . . that reaching agreement on the way forward would be impossible”, opting to pay its way out of that problem instead.

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What should concern ministers is that P&O appears not to have worried about political blowback. Why did it think it could get away with it? And what could – and should – ministers have done to stop something like this from happening in the first place?

Perhaps P&O’s actions were down to naivety from an employer controlled by an international group with a different approach to employment standards. But if that is the case, the UK government needs to do a better job of signalling how strong its stance is on the issue.

This is a government that has pinned its vision for post-Brexit Britain on becoming a high-skill, high-wage economy. If a major employer wants to cut hundreds of precisely those kind of jobs and bus-in lower-paid agency workers with more precarious employment, it should know it risked severe repercussions.

Underfunding

P&O’s actions highlight an underwhelming record by government on enforcement of employee rights. For years campaigners have complained of underfunding for enforcement of employee rights and huge backlogs at employment tribunals.

While the government did last year announce a new single enforcement body for employment laws after a years-long wait, it left the position of director of labour enforcement vacant for 10 months even as the pandemic had tilted the balance of power in favour of employers.

Rishi Sunak’s resistance to extending the potential consequences of P&O’s actions to parent DP World and its freeports risks compounding a perception the UK is ultimately weak on enforcing employee protections.

It is to be expected that the chancellor wants to preserve investment and limit the scope for job losses from other parts of the corporate group. But it cannot be the case that investment buys you freedom from consequences.

For its part the British government needed to show from the start resistance in the strongest possible terms to action by P&O without further engagement. Instead a bungled internal memo from officials a day before the sackings reportedly said changes would “align [P&O]with other companies in the market that have undertaken a large reduction in staff” and “ensure that they remain a key player in the UK market for years to come through restructuring”.

Clearly there is a balance to be struck between flexibility for employers and protection of employees. But it seems reasonable to question whether the UK has drawn that line in the right place.

Guidance

It seems laughable to think that guidance would be sufficient to contain fire and rehire practices, as ministers argued last year, if companies think they do not have to comply with requirements set out in statute as it is.

It cannot be good enough that large companies only have to disclose scant details about their employment models, limiting the scope of investors and others to hold them to account. More broadly, it seems right to revisit once again whether UK corporate law is too shareholder centric and fails to give sufficient weight to other stakeholders, including employees.

P&O has said it acted as it did after “full consideration of all other options”. It should trouble ministers that they preside over a regime in which a company might consider an aggressive attitude to what are, at the very least, employment niceties as acceptable. – Copyright The Financial Times Limited 2022