MANHATTAN (CN) – After a German bank’s employees sued it for slashing their bonuses by 90 percent, the bank sued back, saying bonuses are discretionary, not obligatory, particularly after multibillion-dollar losses. Commerzbank’s projected 888 million euro profit for 2008 crashed into a 6 billion euro loss after Lehman Bros.’ collapse in September set off the worldwide financial crisis.
Commerzbank, successor to Dresdner Bank, says in its New York County complaint that it sent memos to its employees on Dec. 19, 2008 to inform them of the amount of their annual bonus.
But when multibillion-dollar losses from the worldwide financial crisis in late 2008 drowned the bank in red ink, Commerzbank said it decided to “reduce the balance of the discretionary bonus pool (after payment to employees having guaranteed bonus contracts) by 90 percent.”
The bank then sent its employees 10 percent of the amount stated on its Dec. 19 memo, as their annual bonuses.
At least eight employees then sued the bank, claiming Commerzbank had breached contract “by not paying … the full amounts of the discretionary bonus set forth in their respective December 19, 2008 memoranda.”
But the bank insists “that each of the defendant’s employment contracts unequivocally state that they are ‘eligible’ not ‘entitled’ for annual bonuses, and that bonuses are granted in the sole discretion of the employer.”
Commerzbank adds that “these contracts are consistent with policy regarding bonuses set forth in the [employee] handbook.”
The bank says that when it planned the bonuses, in July 2008, it set aside 400 million euros for bonuses, based on projections that the bank would earn 888 million euros that year. But Lehman Bros. collapsed on Sept. 15, setting off the world financial crisis, and the Dresdner/Commerzbank ended up losing more than 6 billion euros that year, according to the complaint.
Commerzbank and the Dresdner LLCs seek a declaratory judgment that they are not liable to the defendants for any bonus payment in 2008. They are represented by Kenneth Kelly with Epstein, Becker, & Green.