Dismissal for disclosing confidential information unfair


5 mins

Posted on 16 Feb 2016

An employee’s dismissal for disclosing confidential information about clients in an online chatroom was unfair in the light of the culture of information-sharing between foreign exchange traders at different banks. 

Speedread

An employee dismissed for disclosing confidential information about clients in an online chatroom had been unfairly dismissed. Although his employer had strict rules on confidentiality, it had not applied them in practice. There was a culture of information-sharing between foreign exchange traders at different banks and the line between “market colour” information (which could be disclosed) and “confidential information” was blurred. In addition, his employer had encouraged him to join the chatroom and had given him no specific instructions about what information could be shared. In the circumstances it was reasonable for him to believe that his conduct was permitted. 

Facts

In Stimpson v Citibank, Mr Stimpson was a foreign exchange trader. In 2010, his manager encouraged him to join an online chatroom in an attempt to gain better market information. Employees at other banks also had access to the chatroom. Mr Stimpson was given no specific guidance on what should or should not be posted in the chatroom, although Citibank’s code of conduct and the employee handbook required employees to keep client information confidential and to use code names to conceal client identities. 

In March 2014, Mr Stimpson was invited to attend a disciplinary hearing to answer allegations that on 12 occasions between February 2010 and August 2011 he had inappropriately shared client confidential information with traders at other banks, including code names to identify clients’ identities. Mr Stimpson argued that:

  • his actions should be considered in the context of the culture of information-sharing within the foreign exchange business;
  • it would be unfair to decide his case before the outcome of a regulatory review conducted by the FCA which covered the same facts and issues (manipulation of foreign exchange markets, including inappropriate sharing of confidential information in online chatrooms);
  • no instructions were given about the use of chatrooms prior to January 2013, the time he stopped using them as instructed.

He also pointed to two examples of managers appearing to condone sharing of confidential information between foreign exchange traders at different banks. 

The chair of the disciplinary process rejected those arguments and informed HR of his decision to dismiss Mr Stimpson in October 2014. However, HR did not inform Mr Stimpson of his summary dismissal for gross misconduct until late November 2014. In the meantime, the FCA’s investigation concluded that Citibank had allowed inappropriate sharing of confidential information in chat rooms, had failed to take adequate steps to ensure its policies on confidentiality were implemented effectively and that the absence of adequate training and guidance increased the risk of misconduct occurring. Although HR were aware of the FCA’s findings, they were not brought to the chair’s attention. 

Mr Stimpson claimed unfair dismissal. 

Decision

The employment tribunal upheld his claim, finding that Citibank had not carried out a reasonable investigation and did not have reasonable grounds for dismissing for misconduct. 

As a regulated individual, the consequences of dismissal for gross misconduct were particularly severe. This meant that a high standard of investigation was necessary which required Citibank to focus on evidence pointing towards innocence, as well as incriminating evidence. Instead, the chair had put too much emphasis on the black letter of the policies and had failed to carry out a proper investigation into the culture of information-sharing, the encouragement by management of this practice and gaps in control. HR’s failure to inform the chair of the FCA’s conclusions prior to sending the dismissal letter also indicated that the investigation was unreasonable. This was particularly so as the FCA’s findings supported Mr Stimpson’s defence that there was a culture of information-sharing, a defence which the chair had rejected. 

In addition, dismissal was not within the band of reasonable responses. It was not sufficient for Citibank to point to the existence of a policy on paper. It was also necessary to consider the extent to which the policy was known and applied in practice. The FCA’s conclusions provided compelling evidence that in practice the line between “market colour” and confidential information was not as distinct as the chair believed. Mr Stimpson had a clean employment record and 25 years’ service and reasonably believed that his conduct was permitted, in view of management’s encouragement to join the chatroom and the absence of specific instructions about what information could be shared. 

Implications

It is no good having well drafted policies and strict rules if they are not applied in practice. Employees need to know precisely what is and is not acceptable conduct and any blurring of the lines can mean that a subsequent dismissal will be unfair. If an employee suggests that their actions were condoned in practice despite breaching the written rules, it is important to investigate that suggestion thoroughly.

The articles published on this website, current at the date of publication, are for reference purposes only. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your own circumstances should always be sought separately before taking any action.