Tensions in an Employer’s obligations to its employees and its regulator

The judgment (published on 30 July 2020) in Ramchandani v Citibank N.A. 3200403/2014 has shone a light on the tensions an employer may experience in complying both with its internal disciplinary procedures and its obligations to its regulator. When an employer owes obligations both to its employee and its regulator, if the former cannot be properly discharged due to the instructions of the latter, what is an employer to do?

The context of this case is pivotal, both in determining the priority of the bank’s duties and in trying to limit its liability which will inevitably result from being unable to satisfy its obligations to both parties. A wider discussion on the facts of this case can be found at http://go-ri.tr.com/Y6JsAl (subscription required).

Mr Ramchandani was a managing director of Citibank, London, whose primary daily function was trading G10 FX. In June 2013, the FCA informed Citibank that it was to investigate allegations that FX rates were being manipulated.

On 9 October 2013, the FCA told the Citibank that they had seen preliminary evidence indicating that there may have been serious misconduct in the FX market in the European time zone, asked that it monitor any relevant activity and, if any concerns were raised, to contact the FCA before acting.

On 15 October 2013, the FCA informed Citibank that it was one of several banks where FX misconduct may have occurred in Bloomberg chatrooms over at least the last five years, and on the same day, Mr Ramchandani was interviewed by Citibank’s lawyers about chatroom use. The FCA provided an interview protocol which the Citibank would be required to follow if it wished to conduct interviews with employees as part of an internal investigation.

On 30 October 2013, Citibank became aware that Bloomberg news were about to publish a story naming Mr Ramchandani and he was placed on unpaid leave. It was expressly stated not to be a suspension but to allow time for an internal investigation and to protect him and Citibank from media interest. He was told that no decision had been taken and disciplinary proceeds had not started. On 4 November 2013, Citibank informed the FCA that it had conducted a preliminary interview with Mr Ramchandani and that it was in the process of collecting and reviewing his communications between 2007 and October 2013.

The letter sent by Citibank said that it planned to conduct a follow up interview with him and would discuss with the FCA enforcement team how such an interview should be conducted. On 8 November 2013, the FCA required Citibank to provide documents relevant to its own investigation, including Mr Ramchandani’s Bloomberg chats and documents.

Citibank was told that it must not disclose the detail of the confidential FCA investigation to anybody other than those who needed to be involved to produce the documents and its legal advisers. On 14 November 2013, the FCA invited Mr Ramchandani to a voluntary investigation interview. He declined and FCA did not exercise its statutory power to compel him to attend an interview.

In an email sent to Citibank, the FCA confirmed the agreement that any interview of Ramchandani by the bank would take place after he had been interviewed by the FCA, and that Citibank would be required to follow the FCA interview protocol. In early December 2013, the FCA wrote again to Citibank confirming its intention to interview Ramchandani and limiting the assistance Citibank could provide to him.

By email dated 10 January 2014, Citibank informed the FCA that it was going to terminate Ramchandani’s employment based on its review of chatroom communications, which it deemed to be evidence of gross misconduct. On the same day, Mr Ramchandani’s line manager telephoned him and told him he was dismissed for cause, but with a payment in lieu of three months’ notice. It is noteworthy that in dismissals for gross misconduct, notice pay is not normally payable.

Mr Ramchandani subsequently brought a claim for unfair dismissal against Citibank. A significant part of that claim was based upon the allegation that Citibank had not followed its own disciplinary procedures, and so the dismissal was unfair for that reason.

In her judgment, Employment Judge Russell said that from 8 November 2013, it had not been reasonably possible for Citibank to interview Mr Ramchandani due to the involvement of the FCA and the express agreement that the FCA interview must take place before a further internal interview with him. She stated that the involvement of the FCA gave rise to a “procedural impasse.”

Citibank’s actions throughout the matter were constrained by the demands of the FCA. It could not adhere to the normal chronology of “investigation meeting=>disciplinary meeting=>appeal=>dismissal=> appeal” process which complied with its internal disciplinary policy and the ACAS Code (which govern that).

EJ Russell found that dismissal was inevitable once a second batch of chats had been authorised for release by the FCA on 15 April 2014, and if there had been a disciplinary process, it was likely that it would have resulted in a fair and lawful summary dismissal within a month. She acknowledged that Citibank’s ability to follow the requirements of the ACAS Code had been restricted prior to April 2014 due to the FCA investigation.

She found that whilst Citibank was restricted in applying the ACAS code prior to April 2014 due to the concurrent FCA investigation, that was not the case from April 2014, after which date it could have complied. For instance, she said, it could have offered Mr Ramchandani an appeal once the FCA restrictions had been eased and the termination chats had been disclosed, but it had not done so. She concluded that there had been an unreasonable failure to comply with the ACAS Code and that the appropriate uplift on an award to Mr Ramchandani was 25% for such a complete failure. This is the maximum that can be awarded in the Employment Tribunal.

The takeaway from such a case is that even in circumstances in which an employer must prioritise its obligations to its regulator over its employee, it still must adhere to those it owes to the latter, to the fullest extent possible. When its obligations to the regulator, which have prevented it from discharging its duties to its employee, have finished, it must consider all the possibilities by which it can remedy the deficiencies in its treatment of the employee. If it does not, the dismissal may be deemed to be unfair, with an uplift in any damages awarded to the employee for failing its failure to comply with the ACAS Code.

Meaby & Co are lawyers experienced in all aspects of regulatory and employment issues. Should you require advice on any aspect of employment law, including the above, please contact Chris Marshall on 0207 703 5034.