Ahead of the 2016 bank bonuses season, two recent court decisions have made it more difficult for bankers to successfully challenge the size of their bonuses or the inclusion of bonus clawback provisions, says GQ Employment Law, the specialist City employment law firm.
GQ Employment Law explains that while banks and other financial institutions in the City are still likely to receive complaints from disgruntled employees unhappy with this year’s bonus, bankers are finding it increasingly difficult to bring a successful legal claim. GQ Employment Law says, despite this, bankers have not been completely deterred from bringing claims for larger bonuses.
Jon Gilligan, partner at GQ Employment Law, comments: “The banks are regularly faced with grievances or threats of litigation by bankers looking to increase their bonus. However, succeeding with a claim has been difficult for several years and recent cases show that the courts are continuing the trend of ruling in favour of the banks.”
“Ever since the credit crunch, banks have been put under pressure from both shareholders and regulators to limit how much they pay in bonuses, but there is a tension with bankers who have high expectations of how large their bonus should be. Banks are helpless to prevent bankers from bringing complaints or launching claims, but they can take comfort from the strength of their position”
By way of example, GQ Employment Law points to the November case involving Deutsche Bank, in which the bank successfully had a suit thrown out of court where a banker had attempted to claim £5 million in bonuses, despite having already been awarded £4.16 million. Jon Gilligan adds: “The recent case against Deutsche Bank regarding a bonus claim does show that bankers who are unhappy with their bonus – even when the annual bonus is already in the millions – will continue to try their luck with the courts. However, the case also demonstrates the strong legal position banks are in to defend such claims unless they have acted unreasonably or in a discriminatory way.”
Courts give Banks more power to clawback bonuses
GQ Employment Law says banks are now also in a much stronger position to enforce bonus clawback provisions because of the recent ruling from the Cavendish Square Holding case. Essentially, a bank is now able to clawback bonuses provided that it has a legitimate interest in the clawback provision and the provision is not unconscionable or extravagant in the circumstances.
Jon Gilligan says: “The Cavendish Square ruling has reduced a banker’s ability to challenge clawback provisions because of technicalities. Prior to this ruling, there was significant uncertainty over whether a banker could dispute whether the amount in question was a genuine estimate of the loss suffered by the bank.”
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