Ex-Bankers File Class-Action Suit Over $66 Million in Unpaid Bonuses
Investment bankers are banding together to reportedly sue their former employer, claiming the bank owes them tens of millions of dollars in unpaid bonuses.
A group of 104 former investment bankers for the now-defunct Dresdner Kleinwort are suing their former employer for $66 million, claiming the bank failed to pay them the guaranteed bonuses -- or bonuses used in an aim to retain workers -- that they were promised at the end of 2008, The New York Times reports. The bank fell into crisis, along with the rest of the financial system, and its parent company was ultimately taken over.
It's rare for a group of former employees to file a class-action lawsuit over bonuses since bonuses are usually discretionary, according to the NYT. But guaranteed bonuses are somewhat of a different animal -- they're promised to especially talented workers or new hires in an effort to retain them -- and they're making a comeback. Banks boosted their use of the one-year guaranteed bonus for new hires in 2010 amid pressure to recruit stellar senior staff, according to the Institute for International Finance, an industry advocacy group.
But discretionary bonuses are stoking some ire among some bankers. This winter a group of bankers in the U.S. threatened to quit their jobs at the Jefferies group if their bonuses weren't up to snuff, according to the New York Post.
Fears of smaller bonuses aren't unique to employees at Jeffries. Across the financial industry, companies are poised to dole out a little less year-end cash. Anxiety over the state of the global economy, new regulations, slow dealmaking and public ire at banks likely pushed banks to slash their bonus pools to the lowest level since the 2008 financial crisis, according to the Wall Street Journal.
Morgan Stanley, for one, announced earlier this month that it would cap all of its cash bonuses this year at $125,000, while top executives won't receive any cash bonuses, according to a separate NYT report.
Multiple estimates predict that Wall Street bonuses will fall this year by a minimum of 20 percent, if not more. At Goldman Sachs, bonus day turned into a "bloodbath," one mid-level employee told CNBC last week, as some workers were told that they weren't receiving bonuses at all and even high-level employees learned that their compensation could be cut in half.
Workers may have reacted in a dramatic fashion because they didn't prepare themselves adequately for the hit. More than 60 percent of Wall Street workers said in an October survey that they expected their bonuses to be in line with or higher than last year's.