David Palmer
It makes no sense for a financial institution to implement redundancies or get rid of underperformers next year when they could accelerate it and do it this year when there's a cap. So I think that there could be a lot of exits from employment towards the end of the year.
Laura Uberoi
Hello and welcome to Everything Financial Services, a podcast from international law firm Addleshaw Goddard. In this series we'll be unpacking key developments, trends and insights shaping the financial services sector. I'm Laura Uberoi, a financial services partner at Addleshaws. On today's show I'm joined by Dave Palmer, Partner in our employment team working in financial services, or as he's known to me, an all-round social media guru as well. Now Dave, welcome. Thanks for joining me.
David Palmer
Well, thanks so much for having me, Laura Uberoi, Private Wealth Finance Supremo. I'm really looking forward to chatting to you.
Laura Uberoi
That’s nicer than what a lot of people call us. I won't go down that route. Everybody is going be bored of hearing me say this, but to bang the drum, I always say to everyone in my team that you need to have an interesting sound bite prepared and always to hand for whenever you bump into somebody and they say, “Hey, how are you?” Frankly, because busy or fine, whilst absolutely correct, is a really rubbish way of wasting an opportunity to have quite an interesting conversation. So let's go into an alternative world where you and I don't know each other as well as we do, and I bump into you in the building and I get in the lift and I say, “Dave, how are you?” What do you tell me that you're up to in passing as we go up all the various floors we've got now?
David Palmer
Well I say “Hello Laura, I'm Dave. I help businesses solve their sensitive strategic people issues.”
Laura Uberoi
Now we're only on the first floor. This is great. Go on then and all right, Dave, that sounds so interesting. Why do you love that so much?
David Palmer
I’ve been attracted to doing employment law for many reasons. The one that I would say that all employment lawyers will tell you is the drama. Right. We are the department that gets all the juicy stuff. And also as well, as well as it just being like an interesting topic because you know employees are always doing naughty things and crazy things are always happening in workplaces, employment law’s became like this lens through which we see society now.
If you think about some of the things that we've seen in employment law over the last few years, it's been about clash of rights, so trans rights, the whole issue about the conflict of rights in the workplace, manifestation of belief and what your employer can legitimately do about that if it feels that you've manifested your beliefs in a way that's incompatible with your employer's principles. All of these issues, we have to deal with them every day in our jobs. And it's really it makes our jobs really interesting, but as well, I feel like we are right at the edge of where society is coming up against its issues. It all seems to now come through the workplace and it's just a fantastic time to be practicing employment law.
Laura Uberoi
You're so right, you do get the good gossip. Although how do you find that with obviously we discuss matters internally within our information barriers of the teams that are dealing with it, but I guess it's great to have that insight. We can't share it any wider. I started life off as a divorce lawyer and I can remember exactly the same. All this amazing fodder for great dinner conversation and yet can't say a word.
David Palmer
Yeah, 100%, but it's been a very interesting time for employment lawyers because so many of our cases have actually gone on to become public matters because there's been so much at stake. And then of course you can talk about them but that's been fantastic for us. We've been up, you know, to the Supreme Court and we've got so many interesting cases. As well, I don't know about you Laura, when you come to explain to your parents or your friends what to do, sometimes it can be a little bit tricky maybe, but actually it's dead easy for me 'cause I can just say, “look at this case” and that makes life a bit easier.
Laura Uberoi
Maybe I did take it wrong. Yeah, no. So my eldest daughter tells people at school that mummy helps people move money and so we sort of have to go scribble around the edges to make sure that that, you know, is in a money laundering, noncompliant manner and, you know, all of the usual good stuff. Yeah, actually. Particularly for parents if they're anything like mine who when you go to visit you've got the neighbours queuing up around the block because, you know, you might be in my case a finance lawyer, but obviously you will know about this parking ticket, neighbours overgrown hedge. You know, potential employment disputes actually come up quite a bit, so you're actually quite useful there. But, you know, all the stuff that sound a lawyer should know the answer that certainly I am and most people would have absolutely zero idea about.
David Palmer
Yeah, and actually being an employment lawyer does make you everybody's best friend at times because lots of people have issues in the workplace and they would just like a steer as to what the lay of the land is and that's just becoming more and more complex as the years go by and is only going to become more complex towards the end of the year 'cause it kind of escapes you that of course our government are making quite a few changes to my area of the law.
Laura Uberoi
Love that with your general sort of unflappable nature. I always think Dave, and I hope you'll forgive me for saying, that the house could be on fire and you'll be like, it's okay. We will get out in a minute. Let's all keep calm and we shall carry on. But there is something infectious about that. Just a few minor changes to the law. But Dave I’ve always wondered as well, and obviously I'm biased 'cause I live in the financial services world, but I guess you get to see people from a spectrum of, whilst you focus on financial services and employment issues for those clients, also the whole gamut of anybody who might have those issues. Particularly do you find as you see different changes in the market, fewer issues coming up with employment issues in the financial institutions? I don't think I'm speaking out of turn to say that it is quite well known that lots of people move in and out of financial institutions maybe quicker than other organisations, professions and the like. And I don't really know what that means for you and fair employment issues.
David Palmer
Yeah, so to reflect on the main difference between the financial services sector and the other sectors is of course the regulatory overlay. That's really the big, certainly I would say this because of my job and how it comes on my desk, but because your employer in a regulated sector, if they are regulated, they're a firm within the meaning of I think it's FISMA, the regulations, they have to provide a regulated reference for you and if your regulated reference says anything bad about you, that really stops you getting a job in the financial services. It's not like a normal employer's reference where the employer could just ignore the request. That's been the big thing, right? When employees leave under a cloud because they've been found to breach the conduct rules or they're not fit and proper, they know they can't find another job again, or it's very unlikely they'll find another job again in financial services in the UK. So therefore they are incentivised to litigate to see if it can somehow get something to improve their situation, whether that's a judgment or whether that's some sort of settlement with the financial institution, which can't do anything about the regulatory reference. It can't change the reference it would give just because an employee's brought a claim or they do a deal with the employee, that's not allowed.
So that's been the big thing over the last years. It's been trying to resolve disputes between employees and their employer in a situation where there's a regulatory reference that stops them getting another job in future.
Laura Uberoi
Naturally, I guess and I only know this from hear say you might tell me if I'm wrong or not, but I'd always been under the impression that it is fairly easy to put a claim in through the employment tribunals and just generally to create noise and be a bit of a pain if you are a disgruntled employee. So I'm assuming that's sort of that landscape can feed it a bit more.
David Palmer
100%. So the employment tribunals, it's very rare that costs are awarded against an employee. So you in the civil courts, if you lose a claim, you're often made to pay the other side's costs or a proportion of them. That rarely happens in the employment tribunal for obvious reasons, right? Because of the disparity of power. But the change that we've seen over the last year in this that ChatGPT's been weaponised and I'm sure there are other providers of large language model services out there, but those would be weaponised by employees because, and I've got sympathy for them because you don't really know what you're dealing with, the law is very complex. You've got this tool that tells you you can say all these things and do all these things and it sounds really impressive. You then encourage ChatGPT or these other services that are encouraging employees to say certain things and to present their claims in certain ways and actually an interesting twist on this is that I've been an employment lawyer for fifteen years and I've seen one case of this thing called interim relief. It's the closest thing we have to an injunction. It's a really rare thing that you can do if you are a whistleblower and you're sacked. You can run off to an employment tribunal and get an application that the tribunal will hear really quickly and if you're successful, your former employer has to keep paying your salary up until the date of your final hearing, which could be two years away, right? So it's very powerful. But I've seen one in the last fifteen years until recently and then our team have seen a raft of them. You know, we're talking maybe five or six in the last six months alone and it's the same across the market. Can you guess where people are getting the idea to bring these applications from?
Laura Uberoi
Claude, to add in another large language model but others out there.
David Palmer
Indeed.
Laura Uberoi
Wow. That is terrifying. I actually had last month for the first time, a law firm sent me a markup of a set of finance documents and they had been put through AI, but unfortunately not checked before sent back out. Yes, sub-optimal. But that is interesting, because I guess it gives you a lot to do, but actually quite worrying, I guess, for institutions who are on the receiving end of and having to deal with all of that noise. And in terms, and maybe I'm getting into too much detail, but in terms of getting that and it having to be a I've been sacked for whistleblowing, what is the substance of what they're saying they were whistleblowing on? Is it because they're whistleblowing relating to financial regulatory issues, or is it whatever ChatGPT, Claude tells them?
David Palmer
It could be anything. There's a prescribed set of things that make disclosure a whistleblow, if we can call it that. But typically the one of course that we see in financial services is individuals saying that there's been some breach of financial regulations, but it's not always that. It could be health and safety regulations or some other breaches of the law, anti-money laundering laws, all that good stuff. Or that it's been concealed, and then that's them disclosing the information. They then have to go on and say that they were sacked because of that or they were subject to detriment by their employer or one of their colleagues because they have been done so. And that's how we get to the situation where we have where we have our whistleblowing claims. And I just want to be quite clear that there are lots of instances of individuals having validly blown the whistle, no doubt about that. But the way that the large language models are pushing, if I can say that, employees towards bringing these really rare applications in large numbers, which are very difficult for employers to deal with because of the timescales, the cost, and from what I gather from the market, which is a small sample, they're not being successful either, these applications, which is why I suggest that maybe Claude and friends are pushing them towards doing things that they wouldn't necessarily have done had it not been for the large language model.
Laura Uberoi
Interesting. And actually I completely hear you in terms of the having to deal with it as a recipient institution in a really short time frame because we're talking about massive institutions where you need to find the right person who deals with it, get the right advice, check any substance as to what is being discussed in a very, very large entity. I'm not going to lie, Dave, as cool goes and as putting on a superhero cape goes, then that is pretty cool.
Obviously you and I do a fair amount of work together as I'm sure you do with lots of other colleagues as well, but I'm assuming that means you do quite a lot of work with our global investigations team who are frequently helping our financial institution clients with sanctions, anti-money laundering, because presumably if there is a concern about that, then there'll be a concern that there was a person or persons dealing with that and then you have to make sure you are compliantly dealing with them in an employment.
David Palmer
Yes, I'm very fortunate to work with some very experienced but lovely global investigations lawyers because we do work with them very closely on matters for our clients because you're quite right. I've given you the most simplest example is that they get a lot of grievances from employees, our clients, financial institutions which have a regulatory component, which means that we have to come in and help from the employment law side and our global investigations colleagues come in and help from the regulatory side and then work out what happens because then you've got a situation that you are obliged to resolve with your employee and you've got a situation which might require you to do something from a regulatory perspective. So we work hand in hand.
Laura Uberoi
It's really good. I am very glad to be able to be on the inside of some of the cool stuff that you get to work on. And I guess in terms of what is coming down the track and you know, those minor little changes that you said were coming up, I guess it would be from my perspective, it would be really helpful to have a couple of takeaways that are easy to drop into conversation with people who you're talking to who will say to me, “Yeah, that's great, but why do I care?”
David Palmer
For sure. So let me start with the thing that I think most of our clients have started coming to speak to us about very recently, trade union access rights. So typically a trade union cannot rock up to the door of a financial institution unless they're already recognised and say, “we want to be able to talk to your staff.”
That's all changing. The Labour government have brought in this reform and it's not really a question of if you can stop the trade union getting access, it's a question of how they are going to get access and the central of it is that there should be an agreement with a trade union that wishes to have access to your workplace, which will set out the terms of that access and if you don't give them that, then they have the right to go off to what's called the CAC, the Central Arbitration Committee, and they can apply through various steps to get given that access and there's increasingly larger fines for employers that don't comply. So a lot of our financial services clients are speaking to us just now saying, right, we know this is coming. How will we deal with that? So that is the takeaway just now in terms of that's takeaway one, what should you be doing? You should be thinking about how you're going to give access rights to the trade unions that will turn up at your door asking to be allowed to set up a stall in your foyer or have a room to, and the whole purpose of this is for them to recruit members and it does not matter that you don't have a single member of a union amongst your workforce or you've never even heard of a trade union, it will be the right.
Laura Uberoi
And sorry not wanting to get free advice, Dave, because pay for your expertise. But in short, what do you do? Do you pick one and then you go with them? Do you have to entertain everybody? TBC?
David Palmer
So there's some slight nuances to the situation. Like obviously if you already recognise a trade union, then it would be quite difficult for another trade union to come along and say that they should have access rights. But that's not impossible. Part of the setup is that that can happen and so what a lot of employers are doing right now is thinking, right, we have an agreement with one or two unions. It will obviously be them that will want to get extra access rights. So let's have a chat to them now. Let's ask them what they think should be in the agreement and let's see if we can come to an arrangement before the law even comes into force, and then we have in place an arrangement, which means that if some other union comes knocking and it's just inappropriate for them to have access rights because we've got one or two other unions, then that's the discussion that can be had then with the other union and you can take it from there. So that's the forward-thinking planning that's going on at the moment.
Laura Uberoi
Yeah, 'cause fundamentally you want certainty, don't you? It doesn't really matter what it then then looks like. Okay, right, well that's a massive takeaway. Okay I’ll have one more.
David Palmer
I'll give you one more. Well the other one which is again and this all comes back to certainty. You're quite right. You’ll hear me banging on on my LinkedIn and social media about how the employers just need certainty. One of the fundamental things that's been part of employment law since I was a nipper is that if you are dismissed, you have to have a period of qualifying service before you can bring a claim for unfair dismissal. It's currently two years, it's going to drop to six months, but fair enough, that gives an employer six months to decide whether things are working out with the employee or not. It's not the end of the world. But what the government had been shooting for was that being zero months, that it would be a day one right and everybody said that's nuts. So the government, and I say everybody said that's nuts, The House of Lords said that's nuts, and the government conceded. So now they're saying it's six months and that's fine. That takes effect from the first of January. But the thing that nobody was expecting is that the government said when they made this concession, that they said, right, well, it will be six months that you'll get your right to unfair dismissal but we're going to remove the cap on compensation. Now, what this means right now is that if you are dismissed and you have two years’ service, the most that you can claim for unfair dismissal, which is, you know, unless there's any discrimination or whistleblowing, but if it's just straightforward unfair dismissal, it's capped. It's capped at a year's salary or about £140,000, whichever is less. So this is the certainty point. If you're an employer and you're going to sack somebody, you know what your maximum exposure is and how that actually manifests itself in the real world is that when you're making redundancies or when you're exiting somebody because they're not performing or because there's some issue and you reach an agreement with them, maybe that's enhanced redundancy pay or a package for them to go, is you can offer them a sum of money that is attractive for them to think, I'll take that because the alternative is trying to fight the employer and that will take two years and I might get nothing. Whereas I'm getting, say, 65% of the total amount I could get. These are very general generalisations but you get the way it works, right? There's certainty on both sides as to what this looks like and to why a deal can be done. When the cap gets removed, I'm friends with a lot of employment lawyers in the City who act for individuals, right? Who are on the other side of these negotiations from me when I'm acting for a bank or another financial institution. Between us, we cannot work out exactly how we are going to handle the situation when there is no cap anymore. There is no anchor so we have to dust off the books and work out how you're actually supposed to calculate loss. It can't just be a commercial deal anymore and it's the same with senior executives. When senior executives exit a business, they don't often get any compensation for unfair dismissal and that's normally because the deal is if you be nice when you leave, you'll get good leaver status under your incentives and therefore it makes absolutely no sense for you to try and bring a claim for unfair dismissal when you've got far more lucrative incentives. That all goes out the window and what you're not going to do is put a senior executive through a performance improvement plan. That would just be nuts. But that is the way the government is now setting up the law. So we've got all these changes coming down the track.
And in terms of the takeaway, well, what are businesses going to do? I don't think it's too much of a secret amongst employment lawyers in the City that we're expecting a very busy end to the year because these changes come in on the 1st January. The unfair dismissal cap goes on the 1st of January. So if you think about it from a common sense point of view, it makes no sense for a financial institution to implement redundancies or get rid of underperformers next year when they could accelerate it and do it this year when there's a cap. So I think that there could be a lot of exits from employment towards the end of the year. This isn't just my personal prediction, this is if you speak to employment lawyers in the City, that's what they predict is going to happen. And it makes sense, right? That's the financial incentives that are being set up by the way the government has made these changes. And so the takeaway from it is that if you're not thinking about it already as an employer, you should be considering, right, if there was potentially going to be some downsizing in some of the financial quarters next year, doesn't it make more sense to do it this year? If you do have underperformers that you were thinking maybe you're not right for the organisation anymore, should you be taking the decision to maybe exit those people this year rather than next year? Those are the difficult conversations that are going on internally just now.
Laura Uberoi
Maybe we should moonlight as employment recruiters for all the movement that's going to happen. That is really good Dave because that's actually tangible, useful. Everybody understands and sees why that is really important. And it's not just moving money between people, which is also useful, but maybe not quite so appreciated. And I guess in that lens, given that actually what you do and the world that you operate in is fundamentally important to the economy and society, because you are talking about the labour force and people who are employed or not and how our institutions operate. If you had a magic wand and you pretend I've not listened to all of your social media, what would you change that you think would have the most fundamental difference in your world at the moment? We'll make you Prime Minister for the day, if not hopefully forever.
David Palmer
Well, completely separately, I do joke that I think I could get made Prime Minister tomorrow if I made a commitment to the electorate that I would fix the price of holidays during school term time.
Laura Uberoi
Please Dave.
David Palmer
That's it. One vote in the bag already.
Laura Uberoi
Done. Sold. I'll get a t shirt for you. Vote Dave, I'm in.
David Palmer
Thank you very much. Now, one thing I would change is the regulatory reference situation. As I've explained, employees exit and they've got a bad regulatory reference. They can't get another job for six years or potentially ever again in financial services. They have no choice but to sue their employer to try and get something from it, be that financial compensation or you know, a moonshot at getting some sort of judgment that exonerates them, even though that's not the function of the employment tribunal, and this is even in cases of gross misconduct, right? Where the employer's just never going to pay them any money, but they just don't really have a choice. Now, what would be brilliant is if the government put in place a sort of judicial body, if you like, that determined whether it was right that an individual breached the conduct rules or not, or was fit and proper or not, because it would take it off the employers and it would break the chain of causation and it would mean employers and employees can come to some sort of, well employers won't necessarily then always be on the hook indefinitely for these very large sums of money that we're more likely to be able to find a way through for both sides, whether that's settlement or whatever. But also to be fair to the individuals, because it's up to the employer, right, whether they breach the contract rules or not and they don't really have an independent means to challenge that if they think the employer’s made the wrong decision. So I would really like to see this body created and I think that would do a lot for particularly our banking clients.
Laura Uberoi
In your spare time you could chair it, set it up, Dave. It sounds, again like everything, it's sounds really obvious, you know. Free up everyone in all places to do something very sensible. And again, back to certainty, right?
David Palmer
Exactly
Laura Uberoi
It's really good, Dave. Dave, I would genuinely talk to you all day, and often we do. Aside from my nosiness, across your career to date, is there a piece of advice or a lesson or something that has fared you really well?
David Palmer
I do half joke that I've made so many mistakes in my career that if I just wrote a book about doing the opposite, you'd probably be in quite good stead. But I think the one bit of advice that just rings true across all industries and all businesses is just be nice to everybody and even when the environment doesn't make it clear that you should, like just be nice. I've got this very strong feeling, Laura, that when I come to retire that the only thing that I think I'll probably be proud about in my career is the positive impact that I've had on other people that I've came across. And I don't always get that right, but it really has become sort of my North Star just now to try and I guess be the colleague and be the boss that I wish I had. And just every day having a laser-like focus on being that best coach or leader or colleague or mentor or however it is that you can contribute. But just being that better person 'cause I think that would make work a better place for everybody.
Laura Uberoi
Well, I'll take the book of mistakes. I'll take that one. Do you know I had some advice actually when I was going through the partnership process, which is the more senior you go up in whatever role you're in, the fewer people there are around to pat you on the back, tell you you've done a good job, thank you, just generally give you the validation that you know you may or may not have been used to receiving. So instead take your validation, your sense of worth, your impact from those around you who want to work for you or with you instead and actually you're absolutely right. Fundamentally having a North Star of ‘have I had a positive impact’ has all sorts of all of the right things you'd want to hear. That's beautiful, beautiful Dave.
Dave, thank you as ever so much for that. I have many, many takeaways and lots of things to talk to people about. And yes, I hope you manage to get through to the end of the year with everything that's coming relatively unscathed. But thank you again.
David Palmer
It was a pleasure, thank you so much.
Laura Uberoi
Thanks for joining us today, everybody, for this episode of Everything Financial Services. Please don't forget to like and subscribe on Apple, Spotify, or wherever you get your podcasts. We would also love it if you would leave us a five-star review, please, as that helps others to find us. And we will see you next time. Bye bye.
