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What you can negotiate when you lose your job in a bank

The worst has happened: your banking job has gone the way of countless others. You’ve been offered a palatable severance package, but there’s little clarity as to what went into it.  Have you, for example, been paid anything for this year’s bonus? How much are you being paid for each year of service? And what are the chances of negotiating a newer, better, severance?

Employment lawyers say you can negotiate your exit package from an investment bank – although they do, admittedly, have a vested interested in suggesting that this is the case.

However, not all of your exit package will be open to alteration. Lawyers suggest some elements are immutable. If you want to negotiate, you need to know where the flexibility is.

1. Bonuses: non-flexible

If you’re let go between now and February 2013, you may feel you’re due at least a portion of your bonus for 2012.

We regret to inform you that this is unlikely to be forthcoming. Worse: you are in no position to negotiate.

“Banks like ABN AMRO used to pay people a pro-rated portion of their bonus when they let them go, “ says Charles Ferguson at Ferguson Solicitors. “But many banks now have a clause in their contracts which says that unless you’re working for them on the bonus payment date they won’t pay you anything.

“If you have this clause, you can try negotiating for a portion of your bonus when you’re made redundant, but it’s usually a case of ‘tough luck’,” says Ferguson.

This unfortunate state of affairs dates back to a court case in 2005. Keen vs. Commerzbank enshrined in UK law the notion that a bank has broad discretion over the level of bonus it pays. The case allows that banks are acting neither perversely nor irrationally if it they make person X redundant the day before the annual bonus is due to hit X’s bank account and subsequently pay X no bonus at all. This applies even if X’s bonus has already been announced.

2. Bonus vesting schedule: generally non-flexible  

If you are laid off, you are likely to leave with a lot of unvested stock awarded in previous years’ bonuses. Depending upon where you work, you may need to wait 3-5 years to cash out of this.

So, can you negotiate? Can you, for example, offer to cut your deferred stock by 50% if you can cash out immediately? Can you ask for any kind of accelerated vesting in return for giving up some of your deferred bonuses?

This sounds like a good idea. Unfortunately, most lawyers say it’s off the table.

The vesting schedule is usually governed by a bank’s central policy and in particular the relevant equity award plan,” says Philip Landau, employment lawyer and partner of Landau Zeffertt Weir Solicitors. “It’s not usually up for negotiation.”

It doesn’t help that the FSA frowns upon accelerated vesting. Sam Whitaker, a lawyer at Shearman & Sterling, says the regulator has stated that it “strongly disapproves” of accelerated vesting in all circumstances – with no exceptions for redundancy.

Nevertheless, Anshu Jain suggested last week that some banks (although not Deutsche) do offer accelerated stock vesting when they make people redundant. And one headhunter told us he’s seen it happen at Goldman Sachs and Morgan Stanley on selected occasions.

“Accelerated vesting used to be much more common,” says Ferguson, “but ever since the FSA’s remuneration rules came into effect most banks have started saying that stock for redundant staff vests according to the existing schedule.”

3. Bonus clawbacks: generally non-flexible

Some banks have very punitive clawback arrangements. Deutsche Bank, for example, reserves the right to claw back 100% of that year’s deferred bonuses in the event that either the division or the firm makes a loss. Deutsche has also extended its clawback provision to bonuses which were awarded by previous employers and which Deutsche bought-out when it recruited experienced staff.

Ferguson suggests that it can sometimes be possible to persuade a bank to lift clawback restrictions on unvested stock bonuses when you’re made redundant. However, this too is likely to be difficult. Lifting clawbacks is also unlikely to be sanctioned by the FSA and Landau says most banks are keen to keep them in place.

4. Non-compete clauses: can be flexible 

Ferguson says there can be some flexibility around the non-compete clauses in your contract when you’re made redundant. Banks will often include restrictive covenants in employment contracts. These state that you can’t move into a job that involves you dealing with current clients until 6-12 months after you’ve left. If you’re made redundant, you may be able to get these relaxed.

5. ‘Lump sum’: most easily negotiable

Most of the time, when a bank downsizes you, it will pay you a ‘lump sum’, says Landau. This will include everything from severance pay to a top-up based upon that bank’s own policy (banks will usually pay 2 weeks’ to one month’s salary per year of service) and – maybe – something to cover the bonus you’ve accrued.

If you feel you were dismissed unfairly, such as due to age discrimination, and it looks like you have a  genuine case against the bank, it may be worth the bank’s while to silence you by increasing your exit package. You need to consult with a labor lawyer first to make sure you have a legitimate complaint.

AUTHORSarah Butcher Global Editor
  • an
    11 January 2014

    Good day,
    I worked for RBC for over 35 years. I fell ill after 35 years and went on Short term disability leave, after approx 4 months, it became long term. I was on long term for no more than 3 months, and my Team Leader phoned me at home stating that my job was gone, they restructured the dept and chose their strongest employees and I was not one of them and that during the past 6 months my work was not acceptable.
    I never was given verbal notices, never anything in writing.
    I was shocked because:
    My work ethics / performance are recorded, when I was off I know that they were giving the performance reviews and I called in to check mine. I was told, it is still the same as ever however I found out 6 months later that they lowered my rating and listed me as unacceptable. ( I realized this as they did not return my calls when I realized that my yearly bonus was very very low.
    I am still off on sick leave, the whole situation was untrue and I have already contacted the Normes Des Travailles who have confirmed that once I am ready to resume work, they will take my case.
    My question to you is, they advised me that they would give me a severence package.
    As you get closer to retirement age ( ie 65 years old ) do the Banks / Financial Institutions reduce the package because you are older ?
    This is what I need to work.
    I was so loyal and hard working that I have had quite the time trying to understand it.
    I did call our Human Resource dept, and they stated that while I was off, it was totally unnecessary to tell me. They could have waited till I returned then they advise you giving you 3 months to seek another position within.
    But my boss, advised me that she did not want me back, no 69 days notice.

    Thank you, if you could advise me

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