Recent large employee practices claims involving UK Financial Institutions

Significant employment practices claims used to be quite rare (outside the US at least). Yet the last two years have seen a number of successful suits in the UK. Below the surface of the publicly reported judgements are also those matters that have settled on confidential terms.

What is driving Employee Practices Liability (EPL) Claims?

It is currently difficult to attend any meeting on risks for Financial Institutions without mentioning Environmental, Social and Governance issues. In our view, the recent increase in EPL claims reflects that wider social awareness of inappropriate behaviour, recognition of endemic discrimination, and a focus by regulators on non-financial misconduct.  The #metoo movement, social media and gender pay gap reporting have been amongst the factors that have emboldened victims to speak out. 

A rising number of sizeable claims

The financial caps on EPL claims means that successful large claims have been relatively rare. However, when it comes to discrimination and harassment allegations, these financial caps can be ignored; a multiple of a high salary can form the basis of the damages assessment. This can become expensive when the claimant is in a relatively senior position or claiming to have been denied career opportunities at a senior level.

We have now started to see more claims and settlements of this specific type.

Recent Claims – Public Record

A number of banks, in particular, have faced multi-million pound claims, with seven figure pay-outs reported.  Three recent examples are:

• In January 2022, a London banker was awarded damages in excess of £2m for sexual discrimination[1].  Allegations included that the female claimant was paid less than her male colleagues, and suffered sexist behaviour in the office.
• In May 2022, Citibank appealed a £2.7m pay-out awarded in 2020 to a former managing director of the energy department, on the basis of age discrimination[2].  He had been made redundant in 2017 after 26 years and at the age of 55.
• In October 2022, Goldman Sachs was reported to have settled a £20m employment tribunal claim made by an employee turned whistleblower[3].

Bubbling under – the confidential settlements

Whilst the details are confidential (as these are matters resolved by settlement) the trend in public claims has been reflected in our own experience, with a noticeable increase in matters involving UK financial institutions with compensation and legal costs exceeding £1m.  Plainly, our experience of significant EPL claims is only part of the market, and it is reasonable to assume that there have been other matters settling confidentially for large sums, of which we are not aware.

Regulators moving on non-financial misconduct

Non-financial misconduct has been in regulators’ sights in recent years, including statements on expectations as to firm culture and employment related conduct[4].  Investigations into non-financial misconduct is certainly an area to watch.

The Future

We expect the trend for significant claims in this area to continue, with past behaviour providing the basis for new claims.  Whilst Financial Institutions may now be taking steps to remedy cultural and management deficiencies in this area, that will not be sufficient to resolve historic grievances.  An employee alleging years of discrimination will not consider him or herself fully compensated by contemporary amendments to working practices.

On a related note, the new world of work since the inception of COVID-19 and economic pressures have created further context to question promotion, termination and working pattern decisions.  We have seen the early signs of claims relating to these issues, although (as yet) we are not aware of significant judgments or settlements as a result.

Many businesses have, for some time, been making changes to working practices to protect against large EPL claims, and we encourage the continuation of those efforts.  EPL insurance provides a way of mitigating against the risks of past acts and your Howden contact can advise on what cover may be available.