Britain has taken significant steps to crack down on the harassment, bullying and cover-ups that can make office life hazardous for many people.
Supporters say the reforms, which would expand rules for misconduct in financial services and prevent companies using “gagging clauses” to silence victims of harassment, should make the workplace safer and more harmonious.
However, the changes have been criticised in some quarters. Opposition politicians have complained of “mission creep” by regulators that threaten economic growth.
Lawyers warn that managers could find themselves held accountable for bad behaviour done by people they oversee, even if they did not know about it. Some worry about employers seeking to pry into their employees’ private lives and social media activity.
The first big change came this month from the Financial Conduct Authority, which said it would expand its rules on non-financial misconduct beyond banks to the 37,000 other financial services groups it regulates from September 2026.
The regulator said it aimed to tackle the “rolling bad apples” problem of people moving between financial services companies to avoid the repercussions of their behaviour.
Its rules mean serious incidents must be reported to the regulator, recorded on a person’s reference for future employers to see and could lead to senior managers being barred from financial services for no longer being considered fit and proper.
The watchdog said its new approach was designed to be a complement to and not a replacement for criminal law or companies’ own disciplinary processes and employment tribunal cases. It added that the changes would also only apply to subsequent events, not retrospectively.
Separately, government-backed amendments introduced last week to the employment rights bill would make non-disclosure agreements null and void if used in cases where employees had been subjected to sexual harassment and discrimination.
The provisions would also allow people who witness harassment to “call it out” without the threat of being sued, the government said. Employees would still be able to request an NDA, as some do after a traumatic ordeal.
The moves follow calls by politicians for regulators to do more to tackle harassment and bullying in financial services after a series of high-profile cases that were highlighted in the wake of the #MeToo movement.
“It has been building up for a while now and non-financial misconduct has been a theme on regulators’ agenda for a number of years,” said Daniel Parker, an employment and partnerships lawyer at Forsters. “This is the helpful clarification we have been waiting for.”
A survey of more than 1,000 financial companies published by the FCA last year revealed a two-thirds rise in reports of non-financial misconduct, with 7.2 incidents being reported per 1,000 employees in 2023, up from 4.2 incidents in 2021.
The complaints reported ranged from sexual and racial harassment, to illegal drug usage and offensive language. The watchdog has warned non-disclosure agreements should not prevent people from reporting misconduct to the authorities. But it said NDAs agreed as part of settlements of non-financial misconduct seemed to be becoming less popular, finding 51 instances of them at the firms it surveyed in 2023, down from 87 two years earlier.
The FCA said its rules should only cover “serious instances” of misconduct to avoid “minor incidents of poor workplace behaviour” being over-escalated. It is targeting conduct in a work environment that is violent, violates a person’s dignity, or creates “an intimidating, hostile, degrading, humiliating or offensive environment”.
The changes should make it easier for the regulator to deal with non-financial misconduct. After hedge fund founder Crispin Odey was accused of sexual harassment and assault, the FCA was initially hesitant to intervene. When the watchdog did impose a fine and ban several years later, it did so over the way the Odey Asset Management boss allegedly frustrated internal disciplinary proceedings, not over the allegations themselves — which Odey denies.
Critics, however, complain the changes will drag companies into policing their employees’ behaviour and making debatable judgments on what is acceptable or not.
Catriona Watt, a partner at law firm Fox & Partners, said: “This imposes a tricky distinction to be made by firms as to what type of social media activity may cross the threshold into non-financial misconduct.”
Christine Braamskamp, managing partner at law firm Jenner & Block, warned the rules placed a “heavy personal burden on senior managers to take action in potentially nebulous circumstances in an era where cancel culture is rife, and offence can sometimes be in the eye of the beholder”.
For Tim Lewis, head of financial services and markets at law firm Travers Smith, the changes mean managers could be held accountable for allowing harassment or bullying to happen between the staff they oversee.
“How far is the regulator prepared to go in terms of assigning responsibility when bullying or harassment happens?” Lewis said. “It is one thing to say the perpetrator is responsible. But it is quite another to hold managers responsible for allowing it to happen.”
However, others believe the rules help put misconduct in the spotlight. “The behaviour has got a lot better,” said a senior City of London adviser. “Everyone used to [have] horror stories, but that doesn’t mean that it’s entirely gone away. Reminders about what is acceptable behaviour and what is absolutely not still need to be done regularly.”
Opposition politicians complain of regulatory over-reach. “This is grade A mission creep and a perfect example of the unintended consequences of having too many well paid, deeply ‘woke’, public sector regulators making work for themselves,” Andrew Griffith, the Conservative shadow business secretary, wrote on X.
Fellow Tory MP and former City minister John Glen said that while such misconduct was “unacceptable”, the FCA’s priority should be to “remove material costs from reporting to allow growth in the economy — that would be a better headline to generate”.
A senior City adviser suggested the FCA “focus on the F in their name”.
But the FCA rejected the barbs. “There was broad support for our work in this area, including from 80 per cent of the firms that responded to our consultation,” it said.
“There is widespread recognition that unaddressed harassment or bullying can indicate poor culture, leading to concerns around a firm’s risk management and controls,” the watchdog added. “That poses a risk to consumers and the markets, and has led to the failure of firms.”
