Credit Suisse bankers are not happy. It’s not just the ambiguity about their employment situation, it’s their bonuses. Suddenly everything that was postponed before 2022 is being held back by Swiss government order. 2022 Bonuses that were “Payable Immediately” will be paid out, but it is not clear what “Payable Immediately” means in this context.
As we reported yesterday, Credit Suisse insiders say office printers are whirring to the sound of hundreds of pages of job contracts being printed out. After that happens, sources say bankers pick up the phone and call labor lawyers.
“There is a lot of trouble,” says a former Credit Suisse director. “A lot of talk, especially from dealers, about the lawsuit against the company.”
The cancellation of deferrals from the past year is a big issue for senior executives at Credit Suisse. They had $1.3 billion in deferred bonuses at the end of 2022, based on a Credit Suisse share price of CHF2.76. Even if these bonuses (some of which are deferred cash) are redeemed at CHF 0.76, that’s still a loss of CHF 360 million. For some, this will be the difference between paying and not paying mortgages and school fees.
The elimination of Credit Suisse bonuses contrasts with the bonuses paid at SVB UK following its acquisition by HSBC and the generous retention bonuses Nomura paid to Lehman employees in 2008.
The success of the Credit Suisse bankers will depend on the small print of seemingly huge documents with bonus clauses.
Charles Ferguson, a veteran London lawyer who has long represented traders in bank litigation, says the Credit Suisse people may have a case. “UBS takes over Credit Suisse and thus assumes the liabilities of Credit Suisse. That would suggest cashing out the bonuses, although obviously the devil is in the details.”
If the detail suggests bonuses were owed, London employment lawyer Philip Landau says Credit Suisse bankers have two possible avenues to go under in the UK. If the amounts are reasonably obvious, he says they can go to an employment tribunal to recover any missed payments, but it must be done promptly, within three months of the due date. If the situation is more complicated, they can go to court, in which case they can have six years. In the latter case, individuals could join forces in a class action lawsuit.
According to Ferguson, it would be difficult for Credit Suisse to argue that it couldn’t afford to pay the bonuses. “If there is a firm agreement to pay X amount and X is not paid because the business cannot afford it, you have 21 days to serve a statutory payment request form and, if the payment request is ignored, file a claim before the High Court to dissolve the Society. In the past I have threatened traders, usually it has given the desired result.”
However, Ferguson says all bets will be void if the contract includes a clause voiding bonuses in the event of a takeover. “I have not seen anything like this in any contract I have reviewed. I find it hard to believe that Credit Suisse would have foreseen the need to include such a clause in their employees’ contracts,” he adds.
For now, Credit Suisse employees remain employed at the bank and are not expected to receive UBS contracts until the deal closes later this year. Ferguson says historic bonuses could potentially be canceled if Credit Suisse were declared insolvent and everyone fired before UBS hired them on different terms. However, past deferrals may still be due.
There is historical precedent for employees getting withheld bonuses back after a merger. In 2013, for example, 23 former Dresdner bankers successfully sued Commerzbank for withholding millions in guaranteed bonuses that had been promised to them when Commerzbank took over Dresdner in 2008.
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