The prime minister said that the P&O Ferries decision to sack 800 workers without notice appears to have broken UK employment law.
Boris Johnson told the House of Commons that the firm could face fines of millions of pounds if found guilty.
The boss of P&O Ferries apologized for the mass firing.
The decision was incredibly difficult, but the only way to save the business, said Peter Hebblethwaite.
Mr Johnson said that under section 194 of the trades union and labour relations act of 1992, it looked to him as though the company had broken the law.
We will be encouraging workers to take action under the 1996 employment rights act.
If the company is found guilty, it will face fines of millions of pounds.
He said that the government would take steps to protect mariners working in UK waters and ensure they paid the living wage.
It comes after reports that Indian agency workers were paid as little as 1.71 an hour to replace sacked P&O workers at the Port of Dover.
P&O said last week that the figure was incorrect, but it couldn't say how much agencies pay workers on ferries.
The minimum wage in the UK is set by law, but some of P&O's ferries are registered in Cyprus.
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