Hi ho, hi ho, is it back to the office we go? Employment insurance in a post-covid world

Employment related claims continues to be a hot topic in the financial and professional services industries. A shake up of working practices for office based businesses is one of the many legacies of covid, and the work from home debate rages on. A focus on non-financial misconduct and the #metoo movement are two reasons behind some major employment claims in recent years^[1].

In this bulletin we explore a recent case considering an employee’s right to work from home, and highlight the PRA and FCA’s consultation on Diversity and Inclusion (D&I).

The big decision

An Employment Tribunal has recently found that the FCA was justified in refusing a manager’s request to work from home full-time^[2]. Whilst recognising that the employee had worked successfully and effectively from home for a long period, the Tribunal assessed that the tangible benefits of some in-office working justified the rejection of the request. Particular examples were the provision of training, management of staff, and ad-hoc advice and support. The Tribunal accepted that fast-paced exchanges and rapid discussions are more achievable in person, and non-verbal communications and body language cannot be witnessed or understood, unless observed.

Back to the old days?

The decision emphatically does not mean everyone can expect to be required to return to the office full-time.

Notably, the decision was not really about whether the decision to require a return to the office was objectively “correct” at all. Rather, it was an analysis of whether the statutory scheme that applies following a request to work from home^[3] had been followed correctly and, in particular, whether the decision was based on “incorrect facts”. Here, the Tribunal determined that:

“it is apparent that detailed consideration has been given to the request and real issues have been identified by [the decision maker] who has applied a qualitative assessment to them which was her decision to make”

It is clear, therefore, that there is a large dose of discretion afforded to the decision maker. 

The Tribunal also made clear that each case will turn on its own facts, and there are some specific points of interest arising from this case:

The FCA had not demanded that the employee return to the office full-time. Its internal policy required office attendance of 40% or 50% of an employee’s time, depending on seniority (similar to the policies of many companies with office-based roles). A requirement to attend full-time would be a different proposition.

There had been no suggestion of a compromise at 10% or 20% attendance instead, but it seems the applicant had indicated this would not be acceptable. The fact there was no formal offer of compromise, therefore, did not make a difference.

The employee’s seniority and management responsibility played a significant part in the decision. The FCA placed particular importance on the employee’s ability to manage and meet junior colleagues, and the Tribunal agreed with those assertions. That said, many might consider the opposite to be true and, indeed, the ability of junior colleagues to learn and observe is often used to encourage office attendance from less experienced staff.

A proper decision-making process reviewing an individual request here was contrasted with a case in which “a blanket restriction on flexible working was clearly not justified”. Companies adopting blanket bans on requests are more likely to face problems.

There does not appear to have been any question of discrimination in the employee’s claim. Full-time requests related to health, disability or caring commitments (as examples) would need to be viewed differently.

Diversity and inclusion consultation – formal regulation at last

Whilst working from home is a legacy of (or at least speeded along by) the pandemic, a range of factors have increased attention on D&I, another major employment issue.

At the end of 2023, the PRA^[4]and FCA^[5]issued co-ordinated consultations on diversity and inclusion proposals for financial services. Regulators have long promoted the importance of workplace culture and the tone from the top, and the consultations (and subsequent rules, planned to be published later this year) seek to put those principles on a more solid regulatory footing. The final rules are expected to incorporate non-financial misconduct issues into fitness and propriety assessments, introduce a number of reporting requirements on D&I related figures, and use the Senior Managers and Certification Regime (SM&CR) to increase individual accountability.

Mandatory reporting on non-financial misconduct – insurers first; others to follow

In the meantime, London insurers were given a very limited window, which ended on 5 March 2024, to provide to the FCA information relating to non-financial misconduct incidents since 2021^[6].  The FCA is “requesting data that includes incidents that took place at the office, working from home, working offsite, and social situations related to work. This can include…staff social events, off-site training and conferences, client entertainment or sponsored events”.

The request emphasises the priority given to non-financial misconduct and the need for businesses to have in place robust systems to prevent, record and deal with non-financial misconduct. Noises from the FCA indicate requests for data from other sectors will follow.

How can EPL insurance help?

EPL insurance^[7] is a product designed to respond to claims made by employees arising out of alleged wrongdoing related to their employment. It is a useful tool to protect against exposure and defend employment related claims. Typical covered claims include those for discrimination, harassment, or unfair dismissal. Negligent evaluation or failure to promote claims would also be picked up. 

The policy covers any damages payable as well as legal costs in defending claims. It would not pick up anything to which an employee was contractually entitled in any event, including unpaid salary, bonuses, notice pay, or similar. Redundancy payments are also excluded.

Whilst the focus of businesses will be on implementing systems to prevent employment claims from arising, mistakes will happen. The review of prior conduct may also flush out claims from historical behaviour, and there is nothing current systems can do to avoid liability for past acts. The working from home conundrum raises another issue that could (and has, as the FCA itself has discovered) lead to employment claims. A focus on individual accountability means that D&O insurance could also be in the frame.

The future of work

Returning to the Employment Tribunal Decision, some of the closing comments are worth setting out in full:

This is a case which raises a key issue in the modern workplace and which will no doubt be the subject of continued litigation. The availability of good quality technology to link people together has had a wide ranging impact on the traditional structures of business operation. The need for staff to provide a physical presence at an office location is a debate which many companies are now engaged in and which the solutions arrived at will no doubt differ considerably from employer to employer, there will not be one solution which will work for all companies or even for all roles within a company. There is at the heart of many of these considerations a ‘qualitive debate’ as to whether face-to-face or virtual contact is better. Ultimately it may be the case that each situation requires its own consideration.

The modern workplace and expectations from employees create significant challenges for employers in a post-covid workplace. An EPL policy is one way in which to assist management of the risk, alongside robust policies and procedures that must continue to adapt to an ever-changing world.