City businesses are facing significant challenges in managing staff with alcohol and substance abuse problems, warns GQ Employment Law, a specialist London employment law firm.

GQ Employment Law says that the problem is increasingly being caused by growing pressure to meet tougher targets as banks struggle to maintain their profitability because of stricter regulatory capital requirements. Paul Quain, Partner at GQ Employment Law, comments, “Managing staff with alcohol or drug addiction problems can be a very significant issue for City employers.”  “Addiction to drugs and alcohol can be widespread in the City because the staff work long hours, face more stress than ever before, and are often expected to entertain clients in the evening. This means that most City employers have to handle this issue at one point or another and the Christmas and New Year period can see the problem flare up because of the busy social calendar.” “Excessive drinking over Christmas may sound like a seasonal cliché, but this is a genuine and very serious problem for the people it affects in the City and their employers.” “With many City workers holding responsibility for managing large sums of money, addiction to drugs or alcohol is even more of a problem than it is for other businesses.”

 GQ Employment Law says that the regulators are expected to take this issue much more seriously in light of the Paul Flowers scandal. There have been signs of the regulator tightening up on trading carried out by traders after consuming too much alcohol. In one high profile example, the UK regulator handed out a five year ban and a personal fine of over £70,000 to a broker who manipulated oil prices while under the influence of alcohol.  In another case, a trader at investment bank was banned after building up and then concealing a large oil trading position after a three hour lunch at which he’d consumed large quantities of alcohol. Major issues that City businesses can face include: A staff member who is an approved individual by the regulator and needs to meet the fit and proper persons regime is impaired from being able to meet these obligations because of an alcohol or drugs problem.

The employee is required to entertain clients putting them into high-alcohol environments that may breed alcohol dependency or expose addicts to an environment that facilitates their behaviour. Says Paul Quain, “Employees may feel that it is their employer’s ‘fault’ if their addiction is exacerbated by the requirement for them to entertain clients. However, businesses don’t require their staff to drink alcohol as part of their entertaining responsibilities and the courts are not sympathetic to this argument.” Employees or contractors refuse to comply with one of the routine drugs tests required by many employers in the City. GQ Employment Law points out that some investment banks require suppliers’ staff such as IT workers to submit to drugs tests. This can cause management headaches for the banks’ suppliers, whose staff may be less willing to submit to drug tests.

A director with a significant equity holding in the business is no longer able to carry out their responsibilities effectively because of their drug or substance abuse problem. Paul Quain explains: “Exiting a shareholder director from the business because of a drug or alcohol problem can be very difficult for the other shareholders. Negotiations to buy out the director’s equity can be fraught, particularly if they don’t recognise that their addiction is undermining the performance of the business.” GQ Employment Law points out that staff who are fired because of drinking or substance abuse problems have been bringing court cases against their former employer, which takes up significant amounts of management time to deal with, even when the case is unlikely to succeed. A recent High Court case brought by a trader at a commodities company who was fired for frequent absences after late-night drinking sessions was described as “ludicrous” by the judge, who said that “an employer cannot be expected to allow an employee who allows himself to become inappropriately inebriated to remain in the workforce.”

GQ Employment Law explains that employees with alcohol and drug addictions are not protected under the UK’s employment legislation, so it is relatively straightforward for businesses to release staff with these problems that are no longer able to perform their duties. Paul Quain adds: “Risk-averse businesses can go through a very formal process with drug or alcohol dependent staff, including providing them with an opportunity to address their problem. However, that isn’t always necessary: if they are a posing a risk to the business, it’s possible to manage out these kinds of employees very quickly.”