Another nail in the coffin for bonus clause
A banker has won a small victory in the quest to banish clauses that allow banks to avoid paying bonuses to employees who have been made redundant.
Commerzbank this morning lost a bid to throw out of court a case brought by a former proprietary trader who claims he was underpaid bonuses worth millions of euros.
James Keen, former manager of the special situations proprietary trading desk at Commerzbank, says the bank shaved around €7m off bonuses shared by his four man team in 2003 and 2004.
More importantly, Keen is disputing the bank's right to pay him no bonus at all for 2005. Keen claims his team should have shared a bonus of €8m for the five months in which they worked before being made redundant in June when the bank closed its proprietary trading desk.
Although he signed a contract that included the clause agreeing to forego his bonus if wasn't working for the bank on the date bonuses were paid, Keen says the bank was wrong to pay him nothing for 2005.
Charles Ferguson, managing director of Ferguson Solicitors, the firm of employment lawyers representing Keen, said the case throws into doubt banks' ability to rely on clauses as a way of reneging on bonus commitments.
"Under these clauses, banks seem to think they can avoid paying people who work for them for a whole year," he says. "Someone might be informed that they're entitled to a 1m bonus, and receive nothing because they're made redundant a day before payday."
These clauses have become increasingly common in recent years, according to Ferguson. In his judgement, Justice Morison said the position was not entirely straightforward. Ferguson said it remains an open question: "I read it that we have a more than arguable case. This could have big implications for the use of these clauses in future."
Commerzbank confirmed that an ex-employee had brought a claim against it, and said it would vigorously defend it. The case is expected to be heard next January.
The case also sheds some light on the formulas which unofficially underpin traders' pay. Keen, who earned a salary of 120,000 a year, is arguing that his desk should have shared a bonus pool worth around 17.5% of its profits as recommended by his manager, instead of the 10% it actually received.
