Wall Street's Bloodletting Could Get Litigious
In previous blogs about hedge funds and in various appearances on television, I've said that rich people have rights too. The same can be said of well-compensated Wall Street employees, especially those who have been fired or laid off. With the downturn in the bull market, we are set to endure a Wall Street bloodletting not seen since the 2001 tech bubble collapsed. In fact, Investment Dealers Digest is reporting that recruitment firm Challenger, Grey & Christmas estimates 140,000 employees will be laid off and this morning CNBC's Charlie Gasparino broke a story about significant layoffs and CitiGroup, one of the largest employers on Wall Street.
While there will be many who won't shed any tears over Wall Street's pain, they might not understand how many employment agreements on Wall Street are structured in the banks' favor. Nor might they understand that Wall Street firms commonly bully employees into agreeing to less than desirable terms when an employee is fired or laid off.
It's commonplace for the worker bees and managers alike on Wall Street to expect much of their compensation as a bonus. Furthermore, deferred compensation, pensions, stock options and other retirement income are regularly used in lieu of a traditional salary in the financial services industry. It's pitched as a win-win for both the brokerage and the employee but the tables can quickly turn when the going gets tough on the Street.
After 2001's layoffs, many employees were terminated shortly before receiving their end-of-the-year bonuses. They were denied much of the compensation and benefits they thought were promised. Instead, employees were coerced into waving their rights under the NASD rules (now known as FINRA) and in return received severance packages not equal to what they could have expected to earn under normal circumstances. Among other concerns, employees feared that their Form U-5's might get marked up which would result in a near banishment from ever working again in the securities industry. It's like the old godfather line: make them an offer they can't refuse.
I hope that the 140,000 Wall Street professionals who lose their jobs this go around learn from the mistakes of others. In the meantime, here's a few tips:
Generally Wall Street employees get paid a modest salary, sometimes around $100,000, and a bonus which can be in excess of $1 million depending upon the performance of the employee and the particular desk. If the performance has been good but the employer decides on a layoff, the employee may have a claim against the employer for the promised bonus.
It is important to understand that these tips are general in nature. They may or may not apply to your situation, so do not rely on them in lieu of legal advice from an attorney in your area.
While there will be many who won't shed any tears over Wall Street's pain, they might not understand how many employment agreements on Wall Street are structured in the banks' favor. Nor might they understand that Wall Street firms commonly bully employees into agreeing to less than desirable terms when an employee is fired or laid off.
It's commonplace for the worker bees and managers alike on Wall Street to expect much of their compensation as a bonus. Furthermore, deferred compensation, pensions, stock options and other retirement income are regularly used in lieu of a traditional salary in the financial services industry. It's pitched as a win-win for both the brokerage and the employee but the tables can quickly turn when the going gets tough on the Street.
After 2001's layoffs, many employees were terminated shortly before receiving their end-of-the-year bonuses. They were denied much of the compensation and benefits they thought were promised. Instead, employees were coerced into waving their rights under the NASD rules (now known as FINRA) and in return received severance packages not equal to what they could have expected to earn under normal circumstances. Among other concerns, employees feared that their Form U-5's might get marked up which would result in a near banishment from ever working again in the securities industry. It's like the old godfather line: make them an offer they can't refuse.
I hope that the 140,000 Wall Street professionals who lose their jobs this go around learn from the mistakes of others. In the meantime, here's a few tips:
Generally Wall Street employees get paid a modest salary, sometimes around $100,000, and a bonus which can be in excess of $1 million depending upon the performance of the employee and the particular desk. If the performance has been good but the employer decides on a layoff, the employee may have a claim against the employer for the promised bonus.
- Secondly, in an employee termination, the employer is required to file termination "Form U-5," which can be viewed by all prospective employers and customers. If an employer files a U-5 which contains false and defamatory language against the employee, the employee may have legal remedies such as seeking expungement of the false and defamatory language and possibly monetary damages.
- If an employee seeks employment at a new firm and the prior employer interferes with the employee's ability to transfer his/her book of business to the new firm, the employee may have a legal right to seek damages for potential wrongful conduct.
- Often an employer will make promises to induce an employee to join the firm. If an employee was made false promises, he or she may have a legal claim of fraudulent inducement of the employment relationship.
- A terminated employee may have a right to compensation under the employer deferred compensation plan or stock option plan.
- If an employee over 40 or female employee are terminated in a way that reflects age or sex discrimination, there may be a legal claim against the employer.
It is important to understand that these tips are general in nature. They may or may not apply to your situation, so do not rely on them in lieu of legal advice from an attorney in your area.
