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Employment in the finance sector: Case spotlight

The financial sector has seen its fair share of discrimination cases and the trend continues.

In Lacatus v Barclays Executive Services Limited the Employment Tribunal turned its mind to sexism. A female Analyst in the Rates Options Structured Trading Middle Office department brought a number of claims against the bank, including a sex discrimination and harassment claim centred around her line manager’s repeated use of the word “bird” to describe a woman. When the claimant objected to the use of the term, the manager said she should not “report him to HR”.

The tribunal found that the term had clearly been used as a part of the ‘banter’ exchanged among the team with the intention of being humorous and that the manager ultimately ceased to use the term following objections from the claimant. However, the Tribunal held that it was reasonable for the claimant to have considered the language to be a disadvantage, and that it was “plainly sexist”. Therefore, it amounted to direct sex discrimination. The Tribunal remarked that sometimes things said ironically can seem rather different “in the cold light of the tribunal room”. It is for this reason that any form of ‘banter’ relating to a protected characteristic should be avoided and staff should be given equality and diversity training. So far as the latter is concerned, such training should be regularly repeated to prevent it from going stale following the case of Allay (UK) Ltd v Gehlen

The claimant was also disabled on grounds of endometriosis and anxiety. The tribunal concluded that the requirement to work long hours placed her at a substantial disadvantage because of those disabilities. The bank’s failure to reduce her working hours was therefore a failure to make reasonable adjustments.

Comment

The fact that referring to women as “birds” has the ability to be sexist, even plainly sexist, seems pretty obvious. However, one would assume that given the context (the manager concerned stopped using the term) it will attract a relatively low injury to feelings award. What we found more interesting were the findings in relation to anxiety, namely that it was a disability and that the bank should have made reasonable adjustments to accommodate that disability. Given financial services generally can be a stressful environment to work in, with incredible pressures placed on people working long hours, it does demonstrate that responding to such claims should be taken seriously.

Two interesting unfair dismissal cases demonstrate how Tribunals can play a significant role in analysing a financial institutions practices and strategy. They are Jones v J P Morgan Securities plc and Volkova v Credit Suisse (UK) Ltd and others.

In Jones v J P Morgan Securities plc, a claim for unfair dismissal was successful after a former trader claimed he was unfairly dismissed by the investment bank. The bank had wanted to show it was taking a tougher line on a spoofing scandal when a number of its staff became embroiled in a criminal investigation by the US Department of Justice, leading to charges of conspiracy and fraud being levelled in 2019 and reportedly nearly $1bn (£724m) in penalties.

Action by the respondent was taken after the claimant entered and then deleted in quick succession two sell orders for shares on 6 January 2016, which the bank’s systems immediately flagged as potential market abuse. During a short investigation at the time the Claimant said he could not remember the reason for his actions, which was noted as an isolated incident involving someone with an unblemished record. At the time, the bank concluded that no disciplinary action was warranted and said that staff should undergo training and various other safeguards were introduced. The tribunal concluded that the bank at the time of the incident had held the claimant not to be guilty of spoofing and no report of suspicious trading was made to the FCA. Further, the respondent continued to certify the claimant as fit and proper.

Following the introduction of a new spoofing policy which provided that a breach would occur if trading activity was “potentially consistent with spoofing”, even if there was no other evidence of inappropriate intent. This new policy was applied retrospectively which led to the claimant being suspended in 2019. The tribunal found that the investment bank had “changed its approach to the 2016 sell orders because of its desire to appease its regulators by showing it was “cleaning up its act”. The bank dismissed the claimant for gross misconduct. On the same day he was dismissed, in a twist of fate, the claimant was told that the bank had notified the FCA that he was fit and proper to perform his role. In the alternative the bank argued at the tribunal that the dismissal was for some other substantial reason – namely, a breakdown in trust and confidence, or that the bank was unable to certify the claimant as fit and proper to perform his role. In a pretty damning judgment, the Tribunal tore apart the bank’s defence, concluding that the bank did not even have a fair reason for the dismissal. The tribunal concluded that the reason for the termination was simply to appease the regulators.

What is “spoofing”? Where a trader places a bid or offer but with the intent to cancel the bid or offer before execution, in order to give the impression that demand or supply of a particular commodity is other than it truly is. The purpose of spoofing may be to cause a change in the price of the particular commodity, which the trader can subsequently use to their advantage by trading at the new price. However, the purpose of spoofing may not be to alter the price at which a commodity is being traded, but merely to increase the liquidity available at the prevailing price.

Comment

The Investment Bank will undoubtedly be disappointed by this decision but may feel that it was preferable to show that it was taking tough action against historic actions of spoofing rather than being subject to the appointment of an independent compliance monitor. Revisiting “historical” acts of alleged misconduct which have already been reviewed by an organisation is highly unlikely, however, to find favour with an employment tribunal.

In Volkova v Credit Suisse (UK) Ltd and others a banker who carried out an ‘unsuitable’ trade which resulted in financial losses was unfairly dismissed because of delays in the investigation process. In August 2018 the claimant went behind the back of heightened supervision measures to complete a trade for a high-net-worth Russian individual. The bank’s reversal of the trade resulted in the loss of 22,000 Swiss Francs (£17,300). The bank argued that the trade also risked reputational damage, had potentially exposed the client to loss, and could have led to a complaint or claim by the client against the bank. In September 2018 the claimant lodged a grievance that made allegations relating to unsupportive management. In March 2019 a disciplinary process began. It did not conclude until January 2020 (some nine months later) due to an “overly” detailed investigation by the bank. The claimant was dismissed for gross misconduct in January 2020.

The Tribunal found for the bank on all substantive issues and concluded that claimant acted “dishonestly and without integrity, deliberately misleading her colleagues and disobeying reasonable instructions”. The claimant’s allegations of whistleblowing relating to alleged poor training, inaccurate representations to the regulatory authorities and failure to provide a safe place of work free from bullying were rejected. However, the tribunal held that the dismissal was unfair due to the disciplinary process being “unjustifiably delayed” by the bank. No reasonable employer would have taken as long to conclude the investigation. The slow process placed the claimant’s professional activities “on hold” because she had been placed on restricted duties, something that was known by all her colleagues. The unreasonableness was further compounded by the fact that the bank was aware that the claimant’s health was suffering, and that she found the process extremely stressful. We have concluded that this is one of the rare cases in which excessive and unjustifiable delay itself rendered the dismissal unfair.

Comment

This case highlights the need for employers to conduct and conclude investigations promptly. The ACAS code (which tribunals need to take into account in considering whether an employer has acted reasonably or not) provides that employers must “deal with issues promptly and should not unreasonably delay meetings, decisions or confirmation of those decisions”. However, this was a somewhat pyrrhic victory for the claimant as a failure on procedural grounds will not attract the maximum award. One would suspect that the bank might be pleased enough with that outcome – and even more so given that any compensation will be significantly reduced as a consequence of the claimant’s conduct.

FCA cases:

  • Ian Hudson has been imprisoned for four years for fraudulent trading in breach of s19 FMSA. His business, Richmond Associates, would use clients’ money to re-pay ex-clients or make payments for other individuals. On occasion, Mr Hudson would simply use client funds for his own personal ends. Confiscation proceedings are being pursued by the FCA.
  • Richard Faithfull has been sentenced to 5 years and 10 months’ imprisonment for laundering £2.5 million. Mr Faithfull paid fictional ‘dividends’ from bank accounts controlled by him to make it look as though the underlying investments were generating returns. The FCA will now pursue confiscation proceedings against him in order to try and seize his illegal gains.

Disclaimer

This information is for educational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given. © Shoosmiths LLP 2022.

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