Where employees of regulated financial services providers ("RFSPs") who perform Controlled Function ("CF") roles breach the standards required of them to perform their role, dismissal may be considered a reasonable sanction, provided the employer complies with its disciplinary procedure and the principles of natural justice. RFSP employers should also have regard to the Central Bank of Ireland's ("CBI") Fitness and Probity regime.
Here we examine two recent cases of the Labour Court and Workplace Relations Commission and highlight what regulated employers should do to successfully defend unfair dismissal claims by senior employees.
Controlled Function Roles
In both cases, the employees were performing a CF role under the CBI's Fitness & Probity regime, as prescribed in the Central Bank Reform Act 2010 (Sections 20 and 22) Regulations 2011, as amended.
Employees in CF roles - including "Pre-approval Controlled Function" roles, which are a sub-set out CF roles requiring prior approval from the CBI - must abide by the CBI's Fitness & Probity Standards (the "F+P Standards"). In summary, the F+P Standards require individuals performing CF roles to be competent, capable, honest and ethical, and to act with integrity and be financially sound. Pursuant to the Central Bank Reform Act 2010, a RFSP shall not permit a person to perform a CF role unless it is satisfied on reasonable grounds that the person complies with the F+P Standards and the person has agreed to abide by the F+P Standards. Guidance issued by the CBI on the F+P Standards specifies that this is a continuing obligation and that where a RSFP becomes aware that there may be concerns over the fitness and probity of a person performing a CF role, the CBI expects that it will be investigated and that appropriate action will be taken without delay. In April 2019, the CBI issued a 'Dear CEO' letter to RFSPs which, amongst other things, cited observed shortcomings in fitness and probity compliance and restated the ongoing nature of RFSPs' due diligence obligations and specifically the obligation to notify the CBI of any potential issues regarding an individual's compliance with the F+P Standards (see previous Walkers advisory here).
Permanent TSB v Christopher Callan (2019) UD/18/227
The first of these cases, Permanent TSB v Christopher Callan, arose after a customer sought to lodge a bank draft made out to the customer and her former husband to her sole account. Permanent TSB's Cheque Handling Policy provided that all cheques and bank drafts made payable to joint payees must be lodged to a joint account except if the cheque or bank draft has been endorsed by both payees.
In breach of this policy, the employee advised the customer to sign her former husband's name on the bank draft so that it could be lodged into her sole account. A call was subsequently made to Permanent TSB in relation to this bank draft, following which the employee voluntarily disclosed his conduct to his manager. A disciplinary investigation commenced. The subsequent disciplinary hearing found that the employee breached the bank's policies, that the employee's conduct amounted to gross misconduct and that a sanction of dismissal with immediate effect was warranted.
Following an unsuccessful appeal, the employee launched a claim for unfair dismissal. The Adjudication Officer ("AO") found that the employee's conduct was serious and warranted a serious sanction but did not constitute gross misconduct. The AO noted that the employee's conduct had not been motivated by personal gain, the employee had an unblemished record of 11 years' service and that the employee had admitted wrongdoing from the outset. The AO found that the dismissal was procedurally unfair and ordered an award of approximately four months' compensation.
The AO's decision was overturned on appeal to the Labour Court which held that the issue to be decided was whether the dismissal was within the range of reasonable responses of a reasonable employer to the employee's conduct and that on the facts Permanent TSB was reasonable in dismissing the employee.
A Bank Official v A Bank (2019) ADJ-00015710
In this case, the employee made an error while setting up an elderly customer's account and sought to rectify this mistake without following the proper procedure or informing the customer or bank that a mistake had been made. It was alleged that the employee had forged the customer's signature by copying the signature from an original document to a new document to request a change to the customer's account. An investigation was commenced when the discrepancy was noticed during which the employee admitted much of the conduct alleged, except for the allegation that she had forged the customer's signature. Following a disciplinary hearing, the employee was dismissed on the grounds of gross misconduct. The AO held that the decision to dismiss was within the range of reasonable responses open to the bank and did not uphold the employee's claim.
Importance of Contractual Documents and Robust Policies & Procedures
In both cases, the employee's dismissal was partly based on the grounds that the employee's conduct breached the employer's policies and procedures. In the Bank Official case, the employee's contract differed in a number of key respects from what might be regarded as a typical contract of employment in that, owing to the employee's CF designation, it demanded a significantly higher than normal level of probity and conduct of the employee reflecting the significance of the role in question and the level of trust necessitated.
Evidence was put forward that a number of policies and procedures were provided to the employee, including a Code of Ethics, and a New Account Opening Procedure for Branches. Similarly, in the Callan case, the employee's dismissal was based on the employee's breach of the employer's Cheque Handling and Cashing Policy, Fraud Prevention Policy and Code of Ethics.
In both cases, the employee had long service and an unblemished record with their employer. An unblemished record is often cited by an employee in an unfair dismissals case as evidence that an employer's decision to dismiss was disproportionate and unreasonable. However, in the Callan case, the employee's eighteen years of service was described as a "double edged sword" on the basis that the employee was aware that he was acting in breach of policy.
RFSP employers should review and if necessary update employee contracts of employment and compliance policies and procedures to ensure that robust standards are imposed on employees. The requirements and standards set out in an employee's contract and the employer's policies and procedures, as well as ensuring the RFSP can meet its legal and regulatory compliance obligations, may greatly assist a RFSP employer in a future disciplinary process where a CF employee's conduct or performance has been unsatisfactory.
Employees should be periodically reminded of their obligations under the F+P Standards and under the employer's internal policies and procedures and the potential consequences of breaching them. CF employees are required to undertake to notify their employer of any developments regarding their compliance with the F+P Standards, and RFSP employers are required to obtain annual confirmations from CF employees regarding any material developments in respect of compliance with the F+P Standards.
Follow Your Procedures
In both cases, it was held that the employer had correctly followed its own procedures. Even in circumstances where an employee's conduct justifies termination of their employment, an employer will lose an unfair dismissal case if it has failed to follow a proper disciplinary procedure prior to dismissing the employee. In both cases, an investigation was commenced to determine whether the employee had a case to answer prior to a disciplinary hearing being convened. Both employees were afforded an appeals process and both appeals processes substantively addressed the grounds of appeal raised by the employee. In both cases, the importance of the decision makers' evidencing that other sanctions were considered before deciding to dismiss an employee was emphasised.
In the Bank Official case, the employee raised allegations concerning her line manager who had been a party to the investigation into her alleged conduct after the disciplinary hearing but before the appeal. The bank halted the appeal process in order to investigate the employee's claims, an independent external investigator was appointed to investigate the employee's claims which were not upheld. The appeal process was then recommenced. This demonstrates that even in circumstances where an employee makes counter allegations late in the process, an employer can successfully conclude a disciplinary process by methodically addressing all issues that arise and sticking to their procedures.
In implementing their procedures, RFSPs should also have regard to their obligations under the Fitness and Probity regime to: (i) investigate concerns regarding the fitness and probity of a person performing a CF and take action without delay; and (ii) to notify the CBI of any such action without delay. Where necessary, RFSPs should review their Fitness and Probity policies and procedures to ensure that these legal and regulatory requirements are factored into the RFSP's processes.
Looking forward, the CBI has proposed the introduction of an individual accountability regime (see previous Walkers advisory here). This regime will include standards of behaviour expected by the CBI for RFSPs and the individuals working within them as well as a Senior Executive Accountability Regime to ensure clearer accountability, requiring a clear articulation of where responsibility and decision-making lies. Once finalised, RFSPs will need to update processes to take account of these obligations - including building these obligations into employment contracts, policies and procedures.
An employer who is investigating any CF employee alleged to have breached their obligations under the F+P Standards should consider whether it is appropriate to suspend the employee on full pay pending the determination of the investigation and any follow up disciplinary hearing.
In the Callan case, the employee claimed that the employer's decision to not suspend him and indeed to allow him to continue working in his role for a period of two months demonstrated that the employer's case that it had lost trust and confidence in the employee was inconsistent with its actions. The employer explained that its decision to not suspend the employee was in line with the High Court decision in the Governor and Company of the Bank of Ireland v James Reilly  IEHC 241. In the Reilly case, the High Court held that placing an employee on paid suspension is "drastic in nature" and has the potential to cause reputational damage that cannot be overcome even where the employee is subsequently found not guilty of the alleged misconduct but may be justified in the following circumstances:
- To prevent repetition of the conduct complained of;
- To prevent interference with evidence;
- To protect individuals at risk from such conduct; or
- To protect the employer's business and reputation.
In Callan, the employer stated that it decided not to suspend the employee as there was no dispute over what had happened, it considered that the process would be carried out in a timely manner, and that it was unlikely that the employee would repeat the incident in the short term.
RFSP employers may suspend a CF employee under investigation or subject to a disciplinary procedure if such a suspension would be justified under the grounds identified in the Reilly case. The Callan case demonstrates that where an employer elects to not suspend the employee, this decision will not prejudice the RFSP employer's decision to subsequently dismiss the employee on the grounds that it has lost trust and confidence. To avoid the suspension operating as a pre-determined sanction, it is important that any suspension is on full pay and should not continue indefinitely or for a prolonged period.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.