P&O was able to legally sack 800 staff without informing the government because of a law change brought in by Chris Grayling, it has emerged.

       The gaffe-prone former transport secretary quietly amended legislation meant to protect workers to create an exemption where there are mass redundancies on ships registered overseas.

       As a result, the business secretary Kwasi Kwarteng is “incorrect” to threaten the ferry company with an unlimited fine if it breached notification rules, a leading maritime lawyer says.

       Labour seized on the revelation as proof that the P&O workers are paying the price for the government giving “the green light to rogue employers to act with impunity”.

       “This scandal is the consequence of a decade in which the Tories have taken an axe to workers’ rights,” said Louise Haigh, the shadow transport secretary. “Ministers must act now and stand up for these loyal British workers.”

       Recommended P&O to pay ￡36.5m compensation to sacked crew members Angela Rayner and John McDonnell condemn ‘disgrace’ of P&O sackings at protest Safety checks for P&O vessels amid claims new crews earning below ￡2 an hour

       The 2018 law change came to light as P&O’s chief executive, Peter Hebblethwaite, insisted the firm had acted legally in a letter to Mr Kwarteng.

       “The very clear statutory obligation in the particular circumstances that applied was for each company to notify the competent authority of the state where the vessel is registered,” he wrote.

       “All relevant vessels are registered outside the UK. Notification was made to the relevant authorities on March 17.”

       Mr Kwarteng had demanded answers by a deadline of 5pm on Tuesday, telling P&O that “clear rules” include “notifying, in advance … the Secretary of State”.

       “Failure to meet the notification obligation is a criminal offence and can lead to an unlimited fine,” he wrote, last Friday.

       But Kevin Barnett, head of employment at marine law specialists Lester Aldridge LLP, told Sky News that Mr Grayling’s amendment meant that was wrong.

       “The amendment states the notification must be made to the competent authority of the state where the ship is registered, instead of the secretary of state,” he said.

       The company – owned by the Dubai-based shipping empire DP World – sparked fury by sacking the 786 staff by video-link and without notice last Thursday.

       It replaced them immediately with agency workers – apparently being paid just ￡1.80 and hour – and is seeking to avoid fines and sanctions.

       Recommended P&O must change course or reputation will take ‘massive hit’, minister warns Union representatives set to brief Stormont on legal plans against P&O Ministers urged to revoke licences of P&O Ferries after ‘deplorable betrayal’

       P&O has also defended its move by arguing it is now paying the largest-ever compensation package in the maritime sector, more than ￡36m.

       It said workers will receive 13 weeks’ salary in lieu of notice and a further 13 weeks’ salary in the absence of a consultation period.