Employment Rights - Barclays - NYDFS Last Look Settlement

Barclays’ & DFS’ violation of employment rights

Most of the facts and opinions stated below are taken directly from or based upon (i) expert legal opinions given by a New York law firm on this case or (ii) the judgement of a UK Employment Tribunal.

On the particular topic of the rights of employees, the conduct of both the DFS and Barclays was so egregiously unprincipled in this case that it may betray a general disregard for those rights. The statutes governing the DFS have been carefully constructed to provide standard protections to individuals whom they wish to remove from employment (New York Banking Law). These include the rights to a hearing, to counsel, cross-examination, presentation of evidence, objection and motion. After considering the evidence, briefs, and proposed findings, the hearing officer “shall” make a written report containing proposed findings of fact, conclusions of law, and citations to the records showing support. If a party disagrees with the written report, he may file objections, briefs, and citations to the record. A determination by DFS to remove a person must be supported by “substantial evidence” in the record. The DFS and Barclays simply ignored all of these legal requirements. The Consent Order instructing Barclays “to take all steps necessary to terminate” the manager was quite simply unlawful. In addition this instruction also directly violates the right to anonymity provided to employees under New York Banking Law:

“Such order and the findings of fact upon which it is based shall not be made public or disclosed to anyone except the director” New York Banking Law – Section 41.

This part of the statute is well chosen, and by ignoring it, the Consent Order and its misrepresentations are a clear libel against the accused Barclays employees.

DFS Both Evaded its Statutory Obligations and Exceeded its Statutory Powers
DFS’s Termination Order to Barclays “to take all steps necessary to terminate” the manager was unlawful and issued without authority. Although the Consent Order purports to be a “Consent Order Under New York Banking Law§ 44,” that section of the New York Banking Law does not provide DFS with the power to order regulated entities to remove employees, nor does it allow DFS to directly remove employees from those entities. Rather, Section 44 merely authorizes DFS to levy an escalating set of financial penalties on certain entities within its scope of jurisdiction, depending upon the severity of the regulated entity’s violation and the state of mind accompanying it. See, e.g., N.Y. Banking Law§ 44(4) (setting forth DFS’s maximum authority to financially sanction “knowing and willful” violations that also “threaten the safety and soundness” of the regulated institution).

In fact, there is a specific provision of the New York Banking Law that makes clear when and how DFS can remove an employee: Section 41, which grants DFS the power to “remove” “any director, trustee or officer of any corporate banking organization or bank holding company” or any”officer of a branch of a foreign banking corporation.” N.Y. Banking Law § 41(1).2 However, Section 41 strictly limits this power. For example,

“[w]henever” DFS wishes to remove an employee it must afford the individual the opportunity to “show cause why he should not be removed from office” and provide procedural safeguards including “a reasonable opportunity to be heard” at a hearing regarding whether removal is appropriate. Id

Notably, DFS regulations provide accused individuals considerable due process protections. Notice for the hearing referenced above must be given at least 30 days from the date of service. See 3 NYCRR § 2.2(b). “Parties to removal proceedings . . . shall at all stages thereof have all fundamental rights, including the rights of counsel, cross-examination, presentation of evidence, objection and motion.” Id. § 2.1. A transcript must be taken. Id. § 2.6. A hearing officer may be designated to regulate the hearings, allow for the taking of evidence, to rule on objections and motions, and to receive offers of proof. Id. § 2.5. At the close of evidence, both parties may submit briefs and proposed findings, and “shall be allowed oral argument.” Id. § 2.7. Ultimately, after considering the evidence, briefs, and proposed findings, the hearing officer “shall” make a written report containing proposed findings of fact, conclusions of law, and citations to the records showing support. Id. § 2.8. If a party disagrees with the written report, he may file objections, briefs, and citations to the record. Id. § 2.9. A determination by DFS to remove a person must be supported by “substantial evidence” in the record. N.Y. C.P.L.R. § 7803(4).

Literally none of these extensive procedures were followed in anyway.

According to a Newsweek report on previous action by the DFS, their behaviour is not an isolated instance:

“Lacking the legal authority to fire any executives, it also crafted language to ensure that none of the terminated employees—some dozen in all—could come back to the bank.”

Barclays have never challenged these facts in any of the Employment Tribunal hearings. Instead their only response was to try unsuccessfully to have these facts prevented from being admitted as evidence. Neither have they expressed any contrition for their abject betrayal of a long-serving employee. It should be noted that the employee concerned was completely excluded from all negotiations concerning the Consent Order. Hence Barclays had a clear responsibility to protect their employee’s rights as he had no way of defending himself.

This is in keeping with the conduct of their own internal disciplinary process which was profoundly and deliberately unfair. They cherry picked documents to support their need to dismiss and obstructed disclosure of documents which exonerated the manager both in their own and the Employment Tribunal process – as was ruled in the Tribunal judgement against them. They appointed a very senior manager – John Mahon – to run their disciplinary process who just lied and lied and lied again thus ensuring the dismissal was carried through. This was demonstrated in the Tribunal using written documents supplied by Barclays. In addition, the employment judge described the testimonies under oath of both Barclays’ senior managers who conducted the disciplinary hearings thus:

“I found Messrs Mahon and Mbanefo’s evidence … , and their justifications for their conclusions, both opaque and contradictory.”

“I was troubled by the contradictions in Mr Mahon’s and Mr Mbanefo’s evidence. It seemed to me that, at times, they were trying to advance justifications for their decisions which had not been in their minds at the time”

“I did not accept Mr Mahon’s evidence on this … Mr Mahon’s evidence was inconsistent with his letter of dismissal”.

Barclays repeatedly misled and misrepresented facts to the Tribunal and engaged in all manner of unscrupulous delaying, game playing and pressure tactics.

Barclays were found guilty of unfair dismissal in a lengthy judgement in which they were extensively criticised for the substantive and procedural unfairness of their disciplinary and appeal processes.

“I have found that … Mr Mahon’s and Mr Mbanefo’s decisions were procedurally and substantively unfair in a number of regards”.

At the subsequent Remedy Hearing, Barclays then went on to fiercely resist re-employing the manager. In remarkable testimony the Global Head of Employee Compliance impugned the honesty and integrity of the dismissed manager – even after the basis for the dismissal had been comprehensively disproved by the Tribunal. She further went on to state that the dismissed employee could not be declared fit and proper for any of the thousands of ‘significant harm’ functions within the bank because of the Consent Order. Only to be faced with the embarrassing evidence that Barclays had already repeatedly declared him fit and proper since the Consent Order.

It is my hope that my legal victories in this case have wider consequences for the treatment of UK employees who are involved in disputes with financial Regulators and their employers. The adverse publicity and the financial consequences experienced by Barclays in their repeatedly unsuccessful attempts to defend the indefensible in this case will hopefully serve as a deterrent to such conduct in the future.