As we can almost see summer holidays on the horizon, we look back at some of the employment law themes we have seen so far this year in the financial services sector.
Supreme Court decision on the Equality Act
The single biggest impact for HR and in-house employment lawyers has been handling the implications of the Supreme Court’s decision on the meaning of “sex” in the Equality Act. Many in-house lawyers have supported firm-wide working groups on highly sensitive topics quite different from their normal areas of focus. Many firms have successfully engaged their employee network groups to gauge sentiment and understand insights from employees. Our Elouisa Crichton has been active on radio, TV and social media, speaking about achieving a balanced response (for example, see here and here). For practical guidance see here.
Employment Rights Bill
With much of the detail of the Employment Rights Bill still to be clarified, further practical preparations will continue in the second half of the year and into 2026. We are not yet seeing activity to review all those with under two years’ service, in preparation for day-one unfair dismissal rights. We had high attendance from FS employers at our recent 30-Minute Briefings on Key Changes in Employment Rights. If you missed these, they are available to view on catch-up. You are welcome to share these with colleagues who can click on a topic of interest here.
Sexual harassment prevention
Whilst there was a surge of activity in preparation for the duty to take reasonable steps to prevent sexual harassment taking effect in October 2024, some of the momentum may have waned. Many employers appear to be focusing primarily on policy development and training, rather than comprehensive risk assessment (extending to suppliers and other third parties) and prevention strategies. Prevention should be proactive rather than reactive, requiring employers to take steps before harassment occurs. There remains an untapped opportunity for legal and HR leaders to role model team discussions on what to do in practice if you witness inappropriate behaviour of a sexual nature.
Shifts in approach to DEI
Overall, the support to building diverse and inclusive workplaces remains a focus. However, some firms are making subtle shifts in language and focus, moving away from the term “diversity” toward more inclusive language that emphasises talent development and inclusion. Similarly, some have shifted focus from representation goals to broader employee development initiatives.
Some UK financial institutions have restricted employee network group activities, including limiting poster displays and event promotions. This trend reflects broader political sensitivities around DEI initiatives and concerns about potential backlash.
The Financial Conduct Authority (FCA) continues to emphasise the importance of diversity and inclusion in the financial sector, although in March it stepped away from its original proposals.
Non-financial misconduct
We are due to hear more from the FCA on non-financial misconduct next month. While the FCA’s “next steps” are difficult to predict, it is hoped that the FCA will provide clarity, or at the very least a pathway to it. We hope, especially in light of pressure on the regulator to reduce regulatory burden and complement the government’s growth agenda, that what is produced takes into account (and is aligned with) the changes in this area proposed by Lloyd’s of London and recent legislative changes, such as the duty to take reasonable steps to prevent sexual harassment, and the further changes proposed under the Employment Rights Bill. In view of the FCA’s commentary on reducing regulation, we anticipate they may scale back the draft guidance included in their original consultation CP23/20, perhaps focusing updates to the Handbook to the section on specific guidance on the rules, adding practical examples of non-financial misconduct.
Blowing the whistle to the FCA
On 12 May 2025, the FCA published its quarterly whistleblowing data showing 281 new reports had been received between January and March this year. The data shows that most of these submissions were received through its online reporting form, with 36% being anonymous. Contained within the reports were a total of 752 allegations with compliance and fitness propriety concerns being the most common. During this period, the FCA also closed 468 whistleblowing reports with 2.6% of them resulting in significant action, 41% in action to reduce harm and the highest proportion having no direct action taken. To review the findings in more detail, the link is here. The FCA has also released guidance to whistleblowers which can be found here. The guidance details the process that follows a report and provides advice on who can make a whistleblowing report and how.
Speak-up culture and claims
Mirroring the FCA’s focus on culture, many firms are reviewing their own speak-up programmes with an eye to whether their culture creates the right environment to foster speaking up, going beyond merely tracking the number of whistleblowing reports. There is focus on understanding the cultural factors that encourage or inhibit reporting.
Whistleblowing continues to be raised fairly consistently in settlement discussions for employees with under two years’ service. Further, we are seeing a surge in whistleblowing claims related to environmental concerns, with employees increasingly speaking out about perceived environmental damage caused by their employers or allegations of “greenwashing” i.e. where companies make misleading claims about their environmental credentials.
These environmental whistleblowing claims are increasingly attracting substantial support from well-funded non-governmental organisations (NGOs) and environmental advocacy groups, who view such cases as strategic opportunities to advance broader climate agendas.
Internal investigations
There is ongoing focus on conducting more effective, efficient, culturally sensitive, trauma-informed investigations. Again, the focus on culture means firms are increasingly asking broader questions about why misconduct occurs, moving beyond individual incidents to understand systemic and cultural factors that may contribute to problems.
Failure to prevent fraud
With the new failure to prevent fraud offence due to come into force in September, firms are working on risk assessments and governance changes. The extent of HR engagement varies, but people risks should form part of any assessment, covering areas such as bonus targets and workload. A review of whistleblowing procedures, onboarding checks, employee monitoring, employment contracts, policies and training are also relevant. Our Regulatory and Investigation team is working with many clients to get regulation ready by helping them to undertake risk assessments to identify any vulnerabilities and gaps in systems and controls, and ensure they are addressed in time for 1 September. Sarah Partridge-Smith wrote about how HR can reduce fraud risk in HR Magazine.
Insider risk to cyber security
With ever-increasing cybersecurity challenges, FS firms are focusing on insider threats, reviewing pre-employment screening and ongoing monitoring of employees who have access to sensitive systems and data.
Return to office mandates
Return to office mandates continue to intensify across the UK financial services sector, with more firms implementing stricter in-office requirements. Linking bonus eligibility to attendance in the office is becoming a trend. Flexible working requests are still consuming significant HR resources, with employees using the statutory process to request personalised exceptions to the firm-wide mandate. While unions have expressed a desire to challenge the mandates through litigation, significant cases have not yet materialised. Our sense is there continues to be reticence to dismiss for non-compliance, although patience with this approach may soon run dry.
AI transforming how we work
There has been a surge in momentum in FS firms to support and increase employee use of AI, as firms roll out tailored AI solutions. A drive to transform the business underlines this approach. We are seeing trailblazers in certain legal and HR functions driving change in how the stakeholders interact with Legal and how colleagues receive HR advice. More AI-powered chatbots are now handling routine HR queries. The larger financial institutions are investing in upskilling their HR and Legal teams to effectively leverage these new technologies.
Increasing volume of employment claims
Finally, we are seeing FS clients experiencing an increase in employment claims. There appears to be a trend of a slight hardening in stance toward long-term absences, leading to more capability dismissals and claims. The backlog of employment tribunal cases continues to lead to very lengthy litigation timeframes. This comes at a time when the employment tribunal system is undergoing significant technological transformation with the rollout of the MyHMCTS online portal, which is set to become the default method for communicating with employment tribunals and submitting responses to claims. As with any new technology implementation, teething problems with the system are to be expected. Building in additional time for document preparation and review before submission deadlines will be key.
