Areas Of Law That Are Priority In Business
- Category Law
- Subcategory Laws & Regulations
- Topic Employment Law
- Words 2422
- Pages 5
Introduction
The purpose of this assignment is to describe, key characteristics of Barclays PLC professional approach to business, and explain what is meant by professional regulation, ethical frameworks and codes of conduct. In this paper, three areas of law will be discussed that Barclays PLC should consider as a priority and outline the key requirements of each.
Established in 1690 Barclays PLC is a multinational banking group with headquarters in London that provides a variety of services like personal and corporate banking and investment and wealth management (Barclays, 2019). Barclays PLC has approximately 2500 branches in the UK and 1000 branches across 75 other countries. Barclays PLC is also listed on the London Stock Exchange, the company’s market cap is £29,756.55m and company revenue ending December, 31st December 2018 was £28,768.00m (London Stock Exchange, 2019).
Banking and financial services in the UK are regulated under the Financial Services and Markets Act 2000 (FSMA) where the regulatory framework for the UK banks comes from. However, part of banking regulation derives from European Laws (Penn, 2019). Appendix 1 and 2 contain a list of other authorities that govern the UK financial sector as well as European regulations that influence UK banking.
‘Regulated profession can be defined as the profession that has a governing or regulatory body that is sanctioned by law to govern or regulate a profession’ (HRPA, 2015). According to Penn (2019), in the UK, there are three regulatory bodies that regulate banking which is Bank of England (BoE), the Prudential Regulation Authority (PRA) which is a division of BoE, and the Financial Conduct Authority (FCA). The FCA and PRA are main UK’s bank regulators and the BoE is the resolution authority. PRA is the prudential regulator for UK banks and FCA regulates the conduct. PRA and FCA together replace the Financial Service Authority (FSA).
Collins Dictionary (2019) defines the code of conduct as ‘an agreement on rules of behaviour of the members of that group or organisation’. To ensure the stability of the UK financial system PRA ensures that financial institutions conduct their business in a safe and sound manner. PRA also ensures that competition in the financial markets is effective (Penn, 2019). ‘The Barclays Way’ is the bank’s code of conduct which outlines the values and the core purpose that sets fundaments in the way of working that the company adheres to. These are respect, service, excellence, integrity and stewardship (Barclays, 2019).
The FCA is responsible for business conduct, consumer protection, promoting effective financial market and competition (Penn, 2019). According to the Institute of Business Ethics (2019), ethics are the application of values like respect, integrity, fairness, openness to professional behaviour. It is about how people do their role and how companies do business. Barclay bank based its ethical framework on ‘A Statement of Principles’ published by Bankers Association (2008).
Sadly, Barclays is not a leader when it comes to professional conduct. Last year (2018), FCA and PRA fined the Chief Executive £642,430m for ‘failure to act with due skill, care and diligence’ in regards to the whistle-blowing letter he received back in 2016. In addition to the fine Barclays will also be a subject to special requirements to report to the FCA and PRA on the way of handling its whistle-blowing cases in the future (FCA, 2018).
Contract Law
Mescher (2010) states that contract law is imperative in business as it is a pillar of our society. Contract Law is the area of law that is a priority for the banks because banks provide services to their customers on a daily basis. Those services include terms and conditions that have to be agreed by the bank and the customer, and those agreements are called banking contracts. Banking contracts are put in place to ensure that the bank and the customer are aware of each other obligations, requirements and expectations. Both the bank and the customer are legally bound by the contract. The terms and conditions included in a banking contract outline the legal basis for the business relationship between bank and customer (Crystal, 2010). The law of contract implies which contracts are enforceable, regulates them and provides remedies if contractual obligations are broken (Macdonald & Atkins, 2014). Appendix 3 contains legislation that covers the general law of contract.
The Consumer Rights Act (2015), outlines rules for supply and sale of goods and services to the customer. A ‘consumer’ is a person who enters into a contract with a trader (Barclay Bank) when a trader sells to a consumer, they both enter into a contract. A contract is an agreement between two or more entities, including an intention to be legally bound (Businesscompanion, 2019). There are certain elements that have to be included in a contract to be legally binding which are an offer, acceptance, consideration and intention to create legal relations. Those elements of the contract are explained in the tables below, including relevant case law.
Offer & Acceptance In the law of contract for an agreement to be legally binding, there has to be an offer made by one party and an acceptance of that offer by another party. An offer can be unilateral or bilateral and it can be written, spoken or implied by conduct. Analysis of the offer and acceptance is a determining factor if there is a sufficient agreement to form a contract. An Offer is a promise made by offeror to enter into a contract based on a set of terms and conditions with the intention to become legally bound if another party accepts the offer. An Offer has to be different from an invitation to treat which is an indication of the willingness to commence or continue negotiations. The difference is that the offer contains the intention to be legally bound, and the invitation to treat does not contain that intention (Macdonald & Atkins, 2014, p9-16). For example, in the case of Harvey v Facey (1893), it was held that there was no contract between parties. Facey did not answer directly if he would sell for a lower price and the answer, he provided was a response to a request for information therefore, there was no evidence of an offer being made. On the contrary, in the case of Carlill v. Carbolic Smoke Ball Company (1893), it was held that the company made an offer and Mrs Carlill accepted that offer with fulfilling the conditions stipulated in the offer (e-law resources, 2019).
Consideration Another element of the contract is a consideration. Consideration is about the exchange of promises. Both parties to the contract must benefit from it and both must suffer a detriment. Consideration is understood in law as something of value (Macdonald & Atkins, 2014, p49). In the Currie v Misa (1874) it was held that there was no contract because the debt, it was not a suitable consideration for negotiable security (Law Teacher, 2019).
Intention to Create Legal Relations Not every contract is legally binding and enforceable through the courts. For example, in the case of Balfour v Balfour (1919), a social agreement is deemed not to be legally binding because there is no intention to create legal relations (e-law resources, 2019). On the other hand, as presented in the case of Esau Petroleum v Customs & Excise (1976) all commercial contracts contain a presumption that the parties do intend to create legal relations unless there is evidence to the contrary (e-law resources, 2019).
Barclay Bank sold Payment Protection Insurance (PPI) insurance to consumers during the sale of personal loans, credit cards and mortgages, which was intended to cover the repayments in case of unemployment, sickness or accident. After paying for PPI many people have learned that they would never have got a payout because of the exclusions in the contract terms and conditions. Following the consumers’ outrage, the FSA introduced rules to stop misselling PPI. In the case of Bankers Association v FSA and others (2011), it was ruled that it was unlawful for banks to sell PPI and that customers should be compensated (Blackstone Chambers, 2011). Barclay bank has been involved in misselling PPI and it cost the bank £9.6bn in compensation claims, Barclay has received more than 2.4 million complaints regarding misselling PPI. The company also had to apologise to its customers after wrongly advising them that they never had been sold PPI and therefore they could not claim compensation (Gladstone Brookes, 2018).
Tort Law
Law of Tort can be defined as ‘the collection of civil wrongs for which the law provides the remedy’ and it is ‘the other half’ of contract law in the law of obligations (Horsey & Rackley, 2015, p3). Rudden (1991-2, p105) outlined around 70 different torts, but in reality, there is no agreement as to how many torts are there. In this paper will be discussed the most common tort which is negligence and duty of care. The tort of negligence gives rights to a person who suffers personal damage or damage to their property to take legal action against someone who failed to take reasonable care for that person’s safety. For the tort of negligence to be successful the claimant must prove that the defendant owed them a duty of care and failed to uphold that duty which resulted in a claimant suffering damage. In the case of Donoghue v Stevenson (1932), it was upheld that Mr Stevenson owed Mrs Donoghue duty of care because she was using his product so she was someone who reasonably and foreseeably would be affected by the way he manufactured its product (Adams, 2016, p 276-77). The law of tort is important in business because every company is liable not only for its own torts but also for the torts of its employees. Under the principle of Vicarious Liability, an employer is liable for torts committed by its employees in the course of their employment. That is exactly what happened in the case of Dubai Aluminium Co Ltd v Salaam (2002), it was held that senior partner was vicariously liable for the tortious act resulting in the claimant losing $50mln (Law Teacher, 2018).
Similarly, in the case of Barclays Bank PLC v Various Claimants (2018). It was held that Barclays was vicariously liable for an alleged sexual assault committed by a doctor hired by the bank to carry out a medical examination of the bank’s female employees. Despite Barclays claiming that the doctor was an independent contractor, it was held that the Barclays relationship with the doctor was ‘akin to employment’ therefore the bank is vicariously liable for the tort committed by the doctor (Casemine, 2018).
Employment Law
Hussan (2016) argues that Employment Law is another area of law that should be prioritised by the business because it regulates the relationship between the employer and the employee. Employment law protects the rights of the employees, but also it regulates what employers can expect from employees, and what employers can ask employees to do. The role of employment law is to ensure a fair and safe working environment for employees and employers, it also guides employers on how t to treat their employees in the workplace. (CIPD, 2019). The laws that govern employment are listed in Appendix 4. The pillar of employment law is the Employment Rights Act 1996 (ERA) that covers the rights of employees in the event such as dismissal, unfair dismissal, parental leave, and redundancy (Lewis & Sergeant, 2013, p18). ERA covers many aspects of employment law, meaning that employees can take legal action against their employer if they feel that they are being treated unfairly. Employers who fail to adhere to employment law can be made to pay large fines. Between April and June 2018 there were almost 11000 cases brought to the Employment (Gubbins, 2018).
In 2018, Barclays Bank has learned that non-compliance with employment regulation can prove very expensive. In the case of Fotheringham v Barclays Services Limited, Barclays has dismissed an employee for alleged gross misconduct following an investigation into bank practices by the US financial regulator the Department of Financial Services (DFS). Mr Fotheringhame was able to prove that he was unfairly dismissed and received nearly £1mln in compensation for lost wages (Assets Publishing Service Gov UK, 2018).
Davidov et al. (2013), argues that a series of tests have to be performed to establish if the person is an employee or worker. A person who works under ‘contract of service’ is an employee as opposed to a worker or independent contractor who work under ‘contract for service’. The employee status needs to be separated from that of the worker or contractor because each type of contract encompasses different rules and liabilities.
A ‘contract of service’ differs from a ‘contract for services’ because under ERA, 1996 the parties to the contract, express their agreement to be one of service through an employment contract. However, the validity of the contract is not dependent on its form, therefore the control test is applied by the courts to determine the status of employment (Adams, 2016, p 378-81). The ‘control test’, is concerned whether the employer had control over the way in which the employee performs his duties. In the case of Walker v Crystal Palace FC (1910), it was held that Walker was an employee at the football club had control over his pay, training and conduct (Colluci & Hendrickx, 2014, p 130). On the contrary the Pimlico Plumbers v Smith (2014 EAT), Appeal Tribunal held that Mr Smith was not an employee, but a worker because he could choose when to work, he provided his own tools and dealt with his own tax and insurance. Furthermore, in the case of Community Dental Services v Sultan Darmon (2010) court ruled that Mr Darmon was neither an employee or worker, but he was a contractor because his contract allowed him to choose a place to do his work if necessary (Adams, 2016, p 379-80).
Conclusion
It has been showcased throughout this paper that it is crucial for any business to adhere to professional regulations, ethical frameworks and codes of conduct. Barclay’s example clearly shows that non-compliance can prove detrimental not only to business financial health, but it can equally damage business reputation. In appendix 5 it can be observed that all scandals that Barclays have been involved in has resulted in share price losing more than half of its value since 2010 (Crow & Morris, 2019). To rebuild its reputation Barclays should strive to play the leading role working with regulators inconsistent open and transparent manner. Barclays should promote a culture that values and protect employees who escalate issues. The bank should develop and implement an effective process to identify and learn from its mistakes.