The financial services and insurance sectors have become notorious for their deep-rooted male dominance and disreputable working environments. Earlier this year, the Financial Conduct Authority (FCA) initiated an inquiry into the prevalence and handling of sexual harassment and bullying across the regulated firms, in an attempt to urgently address growing concerns regarding non-financial misconduct.
In recent years, Lloyds of London, the centuries-old insurance marketplace, has been actively working towards distancing itself from the industry’s tarnished reputation by addressing unprofessional and inappropriate conduct within its syndicates.
Notably, in 2022, it imposed a hefty fine of £1m on a market firm for failing to adequately handle complaints of a ‘systematic campaign of bullying’, alongside incidents of excessive drinking and sexual harassment of female employees.
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In a further effort to stamp out non-financial misconduct, Lloyds is currently consulting on the establishment of a new ‘Market Conduct and Behaviours Framework’. The Framework is designed to empower firms within the market to conduct their own thorough investigations into instances of misconduct.
To achieve this, Lloyds has committed to ensuring that its enforcement byelaws are more seamlessly integrated with firms’ HR and disciplinary processes. In clarifying its oversight functions, Lloyds has stated that it does not intend to become more ‘directly interventionalist’, and instead recognises the necessity of ‘trust with the firms’ to manage internal situations. In the new framework, Lloyds intend to set out “when and how” they will intervene.
To facilitate the firms’ internal processes, Lloyds has compiled a non-exhaustive list of behaviours that will amount to misconduct under the updated enforcement byelaws, including: harassment; bullying, abuse of power; and ‘conducting Lloyd’s business whilst under the influence of alcohol, where this leads to unprofessional behaviour’.
Interestingly, and mirroring the current FCA guidelines, Lloyds has noted that such conduct need not take place in a professional environment in order to amount to misconduct. Expanding on this concept, Lloyds stated that it will have a ‘legitimate interest’ in dealing with any instance of misconduct that has a ‘material connection’ to the Lloyds market.
The current legal standpoint
Lloyds planned crackdown on non-financial misconduct aligns closely with the pending enactment of the Worker Protection Act 2023 (WPA). The Act, due to come into force in October, amends the anti-harassment provisions of the Equality Act 2010, which prohibits ‘unwanted conduct of a sexual nature’.
Crucially, the WPA introduces a positive obligation for employers to take proactive measures to prevent instances of sexual harassment, mandating that ‘all reasonable steps’ be taken to mitigate such conduct.
Lloyds proposed Framework and accompanying amendments initially appear to complement the WPA. However, it would be prudent for Lloyds to produce further guidance on specific changes that firms can implement to ensure compliance with the new legal requirement. Employers must be prepared to make substantial changes to their existing practices and social norms to mitigate risks, particularly in regard to work-related social events where external risk factors, such as the consumption of alcohol, may inadvertently contribute to misconduct.
Due to the notorious reputation of the industry’s culture, the implementation of pre-event briefings, highlighting the importance of behaving appropriately according to the Byelaws could help mitigate risks in the first instance. Also, the reduction or removal of external risk factors, such as alcohol, may become necessary to prevent impairment to professional judgment and boundaries. In practice, the successful implementation of the updated Framework, as well as the WPA, will rely on continuous and clear communication of expected behaviour.
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Remaining grey areas
Whilst the proposed Framework and accompanying amendments represent a commendable starting point for addressing misconduct, further clarity on incidents that occur outside of professional settings would be highly welcome. Although Lloyds asserts that it could have a legitimate interest in addressing such conduct, it is not sufficiently clear where this line is drawn.
A particular concern is that of private relationships between colleagues, particularly where there is a potential abuse of power. Determining whether such conduct is ‘materially connected’ to the Lloyds market will pose a challenge for firms. It is imperative that this concept is expanded upon, to ensure consistency in how firms respond to such behaviour, and to avoid arbitrary interpretations that could allow misconduct to go unchecked.
Ultimately, employers must recognise that their duty of care can transcend traditional workplace settings. Consequently, they should urge their employees to be mindful of their conduct in any context involving clients or colleagues, regardless of whether the situation is explicitly work-related.
However, it is crucial to strike a balance. Lloyds will need to carefully navigate the complexities of their legal obligations, whilst simultaneously respecting their employees’ rights. As the consultation period remains open until 16 December 2024, it will be necessary to review the updated framework proposals following its conclusion to identify any remaining gaps or ambiguities that need to be addressed.
Thomas Beale is partner and head of workplace bullying and harassment at Bolt Burdon Kemp
