Following P&O Ferries’ decision to dismiss 800 workers last month, the government has announced a package of new measures designed to protect seafarers and other employees facing large scale redundancies, including so-called “fire and re-hire” tactics to change employment terms. It also aims to strengthen the right to UK national minimum wage (NMW) for seafarers on ferries operating in and out of the UK.
The proposals include:
- new powers requiring ferries operating in and out of the UK, and when in UK waters, to pay the national minimum wage (NMW)
- ‘minimum wage corridors’ to be explored with like-minded countries to ensure workers are paid an agreed minimum wage
- a new statutory Code of Practice on collective redundancy consultation
National minimum wage
New legislation yet to be published will:
- require employers to pay all ferry staff working in and out of British ports and when in UK waters to pay the NMW
- give ports statutory powers under the Harbours Act 1964 to refuse entry to ferry operators which don’t pay the NMW
The government has also:
- instructed ports to refuse entry to ferries not paying workers the NMW from 31 March 2022 – attempting to immediately implement the effect the new laws will have when introduced in the coming weeks
- requested that HMRC continues to target their enforcement activity, investigating any ferry operators that they suspect do not pay their workers the minimum wage
- announced a new focus on maritime training and welfare, including a £30m investment in the Maritime Training Fund, and called on the International Maritime Organisation (IMO) to hold an international summit to discuss workers’ rights at sea and to revise the status quo on seafarers’ basic pay rates around the world
- written to France, the Netherlands, Ireland and Denmark to propose bilateral agreements that would ensure routes between the countries become ‘minimum wage corridors’ where nationals from either country (although it appears not nationals of other countries) must be paid an agreed minimum wage
- asked the CEO of the Insolvency Service to consider whether the P&O Ferries Chief Executive should be disqualified as a director – a formal criminal and civil investigation has subsequently been launched by the Insolvency Service into the circumstances surrounding the redundancies
- announced it will launch a new recruitment website for seafarers and maritime employers to connect, supporting the recovery and development of the transport industry
- announced reforms to be made to tonnage tax and red tape to be removed to encourage shipowners to flag their ships in the UK (where they will be governed by UK employment law)
What does this mean for employers and seafarers?
There are already some rules in place requiring the payment of NMW to seafarers. A "seafarer" is defined as anyone who is employed or engaged or works in any capacity on board a ship. Before 1 October 2020, the NMW was only payable to individuals who were working or ordinarily worked in the UK, individuals employed on UK registered ships and individuals who ordinarily worked on oil and gas rigs or off shore renewable installations based in UK territorial waters (the area of sea 12 miles around the UK) or on the UK continental shelf.
On 1 October 2020, the NMW rules were extended to all seafarers working on domestic ferry, offshore supply and cargo routes between ports in the UK, and from UK ports to installations on the UK continental shelf, regardless of nationality or where the vessel is registered. This includes those in coastal shipping, passenger and freight ferry services, and fleets which service offshore windfarms and offshore oil and gas exploration and decommissioning.
Failure to pay the NMW can result in an investigation from HMRC, the issuance of a notice of arrears to an employer, a penalty fine of up to 200% of the underpayment (up to a maximum of £20,000 per worker), or potentially civil claims from employees for unlawful deductions from wages or breach of contract. Employers who fail to pay can also be named publicly in press notices issued by the Department for Business, Energy and Industrial Strategy (BEIS). The most serious cases of non-compliance, for example production of false records or refusing to engage with an investigation, may result in criminal prosecution by the Revenue and Customs Prosecutions Office.
Currently, the NMW does not apply to seafarers on ships exercising “a right of innocent passage” and those exercising the right of “transit passage”. Broadly, this means ships which merely navigate across UK territorial waters such as routes running between UK ports and international ports or on voyages calling at a UK port as part of a longer, international, multi-port voyage. Examples include:
- ferry services operating between the UK and mainland Europe or the Republic of Ireland
- voyages calling at a British port as part of a longer international multi-port voyage, and
- vessels on route through the Dover Strait navigating from one part of the high seas to another.
Although we will have to wait for the detail of the regulations, the proposals could now extend NMW rights to cover this first example (the route between the UK and mainland Europe), at least while any vessels are in UK territorial waters, and beyond those waters, for nationals of any countries who sign up to a NMW corridor. In the meantime, it is fair to expect that ferry operators (and other ship operators coming in and out of UK ports) will be closely scrutinised by HMRC with regards NMW compliance. This has been a focus of action by the maritime unions since the new rules were implemented in 2020 so we can expect this attention to continue.
The suggestion that port authorities should refuse entry to ferries not paying NMW has been met with resistance from the ports industry, with the British Ports Association chairman suggesting it would be unworkable, particularly any requirement to enforce this before any legislation is enacted.
Any further implications for P&O’s directors in respect of potential civil or criminal liability arising from the approach taken to the redundancies following the Insolvency Service investigation are yet to be determined, with maritime employers watching with great interest. Clearly whether there is any wider review of international employment practices or UK flag state requirements and red tape once the press interest in this matter has died down remains very much to be seen.
Collective redundancies Code of Practice
The government also announced on 29 March 2022 that there would be a new statutory Code of Practice tackling the use of ‘fire and re-hire’ practices and employers not engaging in meaningful consultations with employees. The new statutory Code of Practice will set out how businesses can hold “fair, transparent, and meaningful” consultation when changing employment terms. It will also include practical steps that employers should follow. It is proposed that an employment tribunal will have the power to award an uplift in compensation of up to 25% for failure to follow the Code.
For more information on the Code, see our article Government announces new statutory code to protect employees from “fire and rehire” tactics to change employment terms