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P&O Ferries' decision to sack 800 workers without notice last week appears to have broken UK employment law, the prime minister has said.
The firm could face fines "running into millions of pounds" if found guilty, Boris Johnson told the House of Commons.
It came as the boss of P&O Ferries apologised for the mass sacking.
Peter Hebblethwaite said the decision was "incredibly difficult" but "the only way to save the business".
Addressing the commons, Mr Johnson said: "Under section 194 of the trades union and labour relations act of 1992, it looks to me as though the company concerned has broken the law.
"And we will be taking action therefore, and we will be encouraging workers themselves to take action under the 1996 employment rights act."
He said if the company is found guilty it faced "fines running into millions of pounds".
He also said the government would take steps to protect mariners working in UK waters and "ensure they all paid the living wage".
It comes after reports that Indian agency workers paid as little as £1.81 an hour have already replaced sacked P&O workers at the Port of Dover.
Last week P&O said the figure was inaccurate but said it could not comment on how much agencies pay workers on ferries.
Some of P&O's ferries are registered in Cyprus, meaning they do not have to pay the minimum wage required by UK law.