Fired Bankers’ Lawsuits Fail as Judges Tire of Bonus Claims

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Fired Bankers’ U.K. Lawsuits Fail as Judges Tire of Bonus Claims
Financial firms in Western Europe have eliminated around 45,000 jobs this year, according to data compiled by Bloomberg. Photographer: Chris Ratcliffe/Bloomberg

Fired bankers suing for unfair dismissal and unpaid bonuses have found little success at London’s specialty employment courts as continuing anger over the financial crisis has left judges unsympathetic.

The adverse decisions from the U.K. Employment Tribunal come after London bankers had a run of legal successes with courts ruling they were entitled to large bonuses written into contracts before the economic downturn. The latest round of cases have largely been based instead on wrongful termination, where the banks have been able to make stronger arguments.

A former JPMorgan Chase & Co. banker, fired for mispricing aluminum trades, discovered the new reality the hard way Oct. 17, when a London judge threw out his suit for not properly explaining how “a large number of errors” he made benefited his trading book by about $400,000. Other claims tossed this year involved securities manipulation and threats from colleagues.

“In the current climate there is little sympathy for bankers,” said Andreas White, an employment lawyer at Kingsley Napley LLP in London. “Banking is the only industry where claimant employees are even less popular” than their bosses.

Bankers have turned to London courts as job cuts in the financial industry have continued. Financial firms in Western Europe have eliminated around 45,000 jobs this year, according to data compiled by Bloomberg.

UBS AG on Oct. 30 said it would cut 10,000 jobs globally amid plans to scale back its U.K. investment banking unit to focus on wealth management. About 100 traders at the fixed-income unit in London were put on leave and sent home on full pay, according to a person familiar with the process.

Eat Cake

“The bankers are right to feel very aggrieved,” said Jo Keddie, an employment lawyer at Winckworth Sherwood LLP. “UBS appears to want to have its cake and eat it since it has put its bankers on special leave and effectively placed them in limbo.”

Zurich-based UBS, however, is one of the banks to score victories at London employment tribunals this year.

A former UBS trader, Ramon Braga, lost his unfair dismissal case in July after he was fired when the bank found he manipulated security values to benefit a colleague. The judge said he had “fundamentally damaged the trust between himself” and the bank.

One employment lawyer said that the verdicts from the tribunal don’t reflect the true nature of the claims because about 60 percent of cases settle before trial. Of the cases that had a full hearing between April 2011 and March 2012, 12 percent were successful, according to statistics released by the U.K. Ministry of Justice in June.

Self Defeating

“It’s a self-defeating group of cases that fall before the tribunal,” said Gareth Brahams, a lawyer at Brahams Dutt Badrick French LLP, who represents employees. “The cases that are being fought by the banks are the ones they are pretty sure they can defend successfully.”

Employment tribunal cases feature caps that limit damages in many instances to 72,300 pounds ($115,000) unless there is proof of discrimination or retaliation for whistle blowing.

“Because there are compensation caps for unfair dismissal claims, dismissed employees might look to bring discrimination or whistle-blowing claims to leverage higher settlements,” said Andrew Taggart, a London lawyer at Herbert Smith LLP.

‘Strikingly Low’

A senior investment banker at Credit Agricole SA, who claimed he was threatened by a manager and unfairly dismissed for reporting it, lost the portion of his tribunal suit related to whistle blowing in April. The judge ruled that while he was unfairly dismissed, the firing had nothing to do with the arguments. The court limited damages to the cap, in contrast to the banker’s complaint about his “strikingly low” 867,896-pound bonus.

“No compensatory award is appropriate,” tribunal judge Anthony Snelson said. “The claimant must be content with a finding that his dismissal was unfair.”

While the U.K government is seeking to restrict damages at the specialty tribunals even further, claims in the trial courts, known as the High Court, can reap unlimited rewards.

Two former Investec Plc traders brought a bonus dispute to the High Court Sept. 7. Andrew Brogden, who led the lender’s structured equity-derivatives desk in London between 2007 and 2011, and his deputy Robert Reid, said the bank failed to pay 6.3 million pounds in bonuses for the financial year ending March 31, 2011.

Bonus Claims

“Huge bonus claims involve figures that are completely outside the scope of normality for most people,” White said.

The nation’s Supreme Court last month potentially expanded the number of cases that could go to the High Court, ruling that public workers in Birmingham could file discrimination claims there after the six-month statute of limitations at the employment tribunals has expired.

“This means that equal-pay claims could be viewed as more lucrative and worthwhile pursuing by staff -- a worrying prospect for employers,” said Lisa Mayhew, an attorney at Berwin Leighton Paisner LLP in London.

The results from the High Court have been mixed this year after several pro-banker rulings immediately after the financial crisis.

In the largest employment dispute stemming from the crisis, a group of more than 100 Dresdner Kleinwort bankers won bonuses totaling about $64 million from Commerzbank AG when a London judge in May found the German lender broke its promise on pay awards. Commerzbank today won the right to appeal when a London judge found it had grounds to challenge the decision.

Decimal Point

In another decision, a trader in March lost his case against JPMorgan after a missing decimal point in his employment contract led him to believe his salary would be 10 times what was offered. Kai Herbert, an unemployed currency trader, stood to win 580,000 pounds if successful.

Herbert “took the commercial risk of accepting the offer, knowing full well that the figure was an error,” Judge Henry Globe said in his March judgment. He accused Herbert of “gross exaggeration,” and ordered him to pay 85,000 pounds in costs.

Before this year, the High Court generally ruled in favor of bankers in disputes over bonuses in the face of public anger about the financial crisis triggered in part by the collapse of Lehman Brothers Holdings Inc.

A former Societe Generale SA managing director, an ex-Seymour Pierce Ltd. investment banker and a derivatives trader who had worked at Rabobank International, in 2010 all won rulings on unpaid compensation claims.

“Many cases coming through were contractual, but now we’re seeing more fact-reliant cases that perhaps aren’t as strong,” said Sean Nesbitt, a lawyer at Taylor Wessing LLP. “The tribunal isn’t disposed to being sympathetic towards opportunistic claims.”

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