Credit Suisse bankers reach for lawyers after bonuses cancelled
Credit Suisse bankers are not happy. It's not just the lack of clarity about their employment situation, it's their bonuses. Suddenly, anything deferred from before 2022 is being withheld by order of the Swiss government. 2022 bonuses that were "immediately payable" are being paid, but it's not clear what immediately payable means in this context.
As we reported yesterday, Credit Suisse insiders say printers in the office are whirring to the sound of hundreds of pages of employment contracts being printed out. Having done this, sources say bankers are hitting the phones and calling employment lawyers.
"There's a lot of anger," says one ex-Credit Suisse director. "A lot of talk, especially from traders about suing the firm."
The annulment of past year's deferrals is a big issue for senior Credit Suisse staff. They had $1.3bn in deferred bonuses at the end of 2022, based on a Credit Suisse share price of CHF2.76. Even if those bonuses (some of which are deferred cash) are redeemed at the CHF0.76, that's still a loss of CHF360m. For some, this will be the difference between paying and not paying mortgages and school fees.
The cancellation of Credit Suisse bonuses is in contrast to the bonuses being paid at SVB UK following its acquisition by HSBC and to the generous retention bonuses paid by Nomura to Lehman staff in 2008.
Whether Credit Suisse bankers succeed will depend upon the small print of what are seemingly enormous documents containing bonus clauses.
Charles Ferguson, a veteran London lawyer who has long represented traders in court cases against banks, says Credit Suisse people could have a case. "UBS is taking over Credit Suisse and as such is taking over the liabilities of Credit Suisse. This would suggest the bonuses should be paid, although the devil is obviously in the detail.”
If the detail suggests bonuses were owed, London employment lawyer Philip Landau, says Credit Suisse bankers have two potential routes to go down in the UK. Where the amounts are reasonably self-evident, he says they can go through an employment tribunal to reclaim lost payments, but that this needs to be done promptly within three months of the due date. If the situation is more complicated, they can go through the courts, in which case they may have six years. In the latter case, individuals could club together in a class action.
Ferguson says it would be difficult for Credit Suisse to argue that it can't afford to pay the bonuses. “If there is a firm agreement to pay amount X and is X is not paid because the company cannot afford it, you can serve a statutory demand form requiring payment within 21 days and, if the demand is ignored, you can then file a petition in the High Court to wind up the company. In the past I threatened for traders, usually it achieved the desired outcome.”
However, Ferguson says that all bets are off if there's a clause in the contract that voids bonuses in the situation of a takeover. "I have never seen such in any contract that I have reviewed, I find it hard to believe that Credit Suisse would have foreseen the need to include such a term in its employees’ contracts,” he adds.
For the moment, Credit Suisse employees remain employed by the bank and are unlikely to get UBS contracts until the deal is finalized later this year. Ferguson says historic bonuses could potentially be cancelled if Credit Suisse were declared insolvent and fired everyone before UBS employs them on different terms. However, past deferrals may still be owed.
There are historical precedents for employees recovering bonuses withheld following a merger. In 2013, for example, 23 former Dresdner bankers successfully sued Commerzbank for withholding millions in guaranteed bonuses that they'd been promised when Commerzbank acquired Dresdner in 2008.
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