A lot of Wall Streeters assume that they don’t have legal recourse if their firm slashes their bonuses or lays them off. After all, bonuses are discretionary, politicians and the public hate them these days, nearly everyone has an arbitration agreement and most of those laid off don’t have a plausible discrimination claim. But, as it turns out, things aren’t as bleak as they seem.
Heidi Moore at Deal Journal does an excellent job interviewing John Singer, name partner of law firm Singer Deutsch, who represents bankers and traders in their bonus disputes with banks. And he’s got some good news. Here are some highlights:
- Arbitration Is Your Friend. “In court, bonus cases are iffy. They say bonuses are discretionary. But securities industry arbitration panels understand that employees’ base salaries are low and that the bonus is the bulk of their pay. It’s really a bonus–no pun intended–to have arbitration rights. What we have seen in the past is that arbitrators have a proclivity to doing what’s fair and equitable as opposed to really applying the law in a stringent way. The case law is not that favourable in the bonus area, so it’s really about finding equity in arbitration.”
- Traders Have The Best Case. “You see traders who are way up [in profits] for the year, who worked at Bear Stearns before J.P. Morgan took them over. The traders can be up $30, $40, $50 million. J.P. Morgan can say, “we can take the profits generated by the individuals, but don’t have to pay the individual a bonus.” They will fire them. The bank can take the trading book for themselves. They can have their cake and eat it too. We’ve seen that a lot with these arranged marriages, where you didn’t see it before. [J.P. Morgan declined to comment. One key point a person there made is that no one’s bonus is legally guaranteed.]”
- Investment Bankers Might Be Screwed. “It’s easier for traders. Traders have an ascertainable book to look at. If you’re a trader at Goldman and you’re fired at the end of the year, and you’re up $30 million, you can say, “here is my bonus now, here was my bonus last year, and here’s how much I brought in last year.” When it comes to bankers, they have to rely on their contributions, what role they had in originating deals, what role they had in getting deals done. Traders have a very, very easy road, because they can use last year’s bonus as a comparison for this year. For bankers it’s a much more amorphous damage calculation.”
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