Investec tribunal decision case will not stem tide of litigation
Barton's case was the latest in a line of recent cases where senior female employees in the financial sector challenged their employers' decisions concerning annual compensation and incentive awards.
In quick succession, Nomura, Deutsche Bank, Schroders and Charman Underwriting have each faced well-publicised claims. Each case has been concluded with substantial payments being made to the former employee. Each case has generated headlines that have been embarrassing for the institution concerned.
Against this trend, Investec fought off Barton's claim. Does this represent a sea change in attitudes or is it a one-off, based on its own facts? Is there waning sympathy from tribunals for former employees who still earned hundreds of thousands of pounds each year?
In Barton's case, the Employment Tribunal found that the difference in annual compensation between Barton and her often younger male colleagues was due to factors other than gender. They found that she had, in performance terms, fallen behind colleagues who had previously been junior to her and these disparities in performance justified the considerable differences in their respective annual incentive awards.
The tribunal went on to recognise that discretionary bonuses and confidentiality in relation to compensation were key components of the system operated by the City of London in setting individual remuneration.
On the latter point, the tribunal was concerned that Investec, as with most securities houses, operated a compensation system that was unwritten and was not transparent. Investec's record-keeping was criticised. In this regard, the decision echoed comments made in the earlier successful claim brought by Julie Bower against Schroders, where it was heavily criticised for an almost identical compensation system. Bower was awarded 1.4m (e2.2m).
Given that the Kingsmill Report into equality of pay, commissioned by the UK Government and released last year, demanded greater transparency in systems by which individual pay was assessed, this is a theme that is not going to disappear by virtue of the decision in Barton's case. Notwithstanding Investec's success, the impetus is for change and the City of London may not be able to resist greater openness for much longer.
Sex is not the only issue to have in mind in this regard. In 2001, Nomura was the loser in a case brought by one of its male proprietary traders. He was leaving, but had completed a full performance year with Nomura. He was given a nil award, despite having had a hugely successful year.
Nomura said it was exercising its discretion and the nil award was a reflection of his 'longevity' - as he was leaving, they no longer needed to incentivise him. In the absence of any real evidence of other factors being relevant to assessing annual incentive awards, the court found that performance was the only real factor relevant to Nomura. The employee was, therefore, awarded more than of 1m by virtue of the 'perverse' exercise of discretion by Nomura.
Although the Barton decision will be welcome news for many beleaguered financial institutions in these difficult times, employers should be wary of reading too much into it. It is almost certainly a decision based on its facts - the tribunal accepted the employer's evidence on the reasons for its compensation decisions.
It seems unlikely that it represents a turning of the tide. Barton is also said to be planning an appeal.
Disputes concerning bonuses will continue to hit the headlines. With the annual bonus round rapidly approaching, and hard decisions to be taken in the light of declining revenues, institutions would benefit from communicating all factors taken into account in assessing award - the need to retain particular skills or aspects of performance that are non-financial - and from documenting, at least to some extent, reasons for each individual's award.
If an employer finds itself in Investec's shoes, taking such steps may go some way to helping secure a favourable outcome.
