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The debate: can bankers sue successfully if their bonuses aren't big enough?

by LLB Editor
3rd Jan 12 3:49 pm

As David Cameron announces a crackdown on top executive pay, we found out whether bankers’ bonuses will ring in this year.

It’s that time of year again, when bankers expect to see fat bonus cheques coming their way. But with the economic apocalypse staring us in the face, the much-awaited money might never materialise.

The Telegraph reported today that “disgruntled” bankers won’t shy away from suing their employers if they get lower bonuses than usual.

One claim for £1.5m is understood to have been filed already after a banker believed their 2011 bonus was too low. However, the case is believed to have been rejected before it reached court, with lawyers acting for the bank branding the claim “whimsical”.

The mere suggestion has many up in arms, including London entrepreneur Charlie Mullins, MD of Pimlico Plumbers: “We’ve heard it all now from those spoilt ‘Crooks in Suits’. They are now ready to sue the bank they work for if they feel that the extravagant bonus they receive this year is too small and less that they deserve!”

“The nerve of these greedy and corrupt bankers is beyond belief sometimes especially when in my eyes not one of them deserve any bonus at all.

“And the fact that have ‘wriggle room’ in their contracts that can be exploited and have once again found a loop hole just goes to show that the financial regulations are not up to scratch.

“The bankers think they are invincible and so far they have been able to get away with doing what they like. Their ‘luck’ has to end one of these days and they will get their comeuppance for their dishonest actions!”

Mullins may not be the only London business person fuming at the news but will more bankers still bite back at dimished bonuses and take their employers to court?

The legal world is divided on the issue.

“Banks should brace themselves for damning law suits

Richard Fox, employment partner at law firm Kingsley Napley, told The Telegraph: “We’re seeing an increase in bankers seeking advice on their options. There are people [who will be] disgruntled they are getting less bonuses so why wouldn’t they?

“Particularly if their team is doing well, or the UK is doing as well as it could despite the bank doing badly in other departments like the Swiss or French arm.”

Philip Davies, employment partner at Eversheds law firm, agrees with Fox.

Speaking to The Telegraph, he said that discretionary bonuses were going to be smaller this year compared to last because of  lack of funds. But employees could “raise grievances” and bring claims over the judgment used to determine the size of payouts.

“Banks have nothing to worry about”

LondonlovesBusiness.com spoke to London’s leading employment lawyers, who on the whole do not expect any forthcoming law suits.

The lawyers point out that a bank’s prerogative is to give a discretionary bonus – a bonus that is not routine and payment depends on the will of the employer.

Jon Gilligan, partner at GQ employment law told LondonlovesBusiness.com, “Every year, there are bankers who are unhappy with their bonuses who raise complaints either through an internal grievance or an actual legal claim. If anything, there are likely to be fewer complaints this year due to the economic situation, but there will still be complaints.

“Bankers have very limited employment rights to secure a larger discretionary bonus. In short, a banker who participates in a typical discretionary bonus scheme has to persuade a court that the bank has exercised its discretion perversely/irrationally, i.e. no rational bank would have made the same award – this is a very high hurdle.

“The overall economic situation (including the bank’s own financial situations and the pressure banks are under to reduce bonus payouts) must be taken into account when deciding whether a bonus award is irrational or not,” explains Gilligan.

Kevin Poulter, employment lawyer at Bircham Dyson Bell LLP says, “The economic climate will play a part in the way that bankers and employees are rewarded. Whether this is by payment of discretionary bonuses or the extravagance of the Christmas party, businesses have felt the pinch in 2011.”

“Problems arise where a bonus is contractual, or where a discretionary bonus has been set at a certain level and paid as a matter of course over a number of years.  In essence, this custom and practice can render the payment of bonuses a contractual right.  If a claim succeeds in the courts it is likely to be on this basis.”

Bettina Bender, partner, CM Murray, says, “I don’t see more bankers suing employers unless there has been a very compelling reason like the bankers were promised a bonus following a lucrative deal and were later denied a bonus.

“Bonuses are the ideal way of incentivising staff and retaining the best talent. I think at austere financial times like now, banks would do only what fair to ensure they dont lose out on talent that is essentially responsible for the bank’s future.”

Employment lawyer Ronnie Fox of Fox solicitors says, “I think people are crying wolf for no reason. If a banker is been denied a promised discretionary bonus, he has to prove that the bank acted irrationally or perversely.

“The only time when there is room for a valid claim is when the bankers are laid off and denied their share of bonus for the year.”

“It’s been a tough year for the banks that are constantly blamed for either not providing funding or providing risky funding. Therefore, I doubt they’d be unfair to employees and will work out bonuses transparently”   

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