Libor traders likely to walk away with money, say Zaiwalla & Co. lawyers
Dennis Cooper and Varun Zaiwalla, part of the litigation department at Zaiwalla & Co. Solicitors, warn that a recent court ruling in the UK suggests errant Libor traders will walk away from their jobs with full payment in lieu.
One might be forgiven for wondering whether a number of bankers may soon be “let go” by their employers as the banks’ trials and tribulations following the Libor fixing scandal unfold. Given the rates of remuneration they tend to enjoy, making most of us appear by comparison to be journeyman labourers, this could be an expensive time.
In some cases their employers will be well aware of their employee’s transgressions and will act with appropriate ruthlessness. In other cases the truth may yet to have fully unfolded. Given that the Libor scandal is some five years old and has only recently come to light it may well be that there are many more horrors to come.
So what happens when a bank decides that the time has come to cut the Gordian Knot and let its thrusting trader venture out to pastures new… ie, sack him?
Given that it is neither normal nor wise to require or permit a trader to serve out his notice an employer has really two options.
The simpler is to activate the payment in lieu clause in his contract of employment. The messier is summarily to dismiss him on a pretext (probably unsubstantiated) and let the employment lawyers deal with the fall out with a generous payment. In the past experience suggests that the former option is preferred.
After all if he was subsequently found to be guilty of a sackable offence the payment in lieu could be withheld on the well established principle set out in Boston Deep Sea Fishing and Ice Co v Ansell ((1888) 39 Ch D 339), that an employer may rely upon an after discovered act of gross misconduct in defence of a claim for wrongful dismissal and the lost remuneration and benefits which result.
The same would apply if he went through the other route i.e. summary dismissal on a trumped up allegation, but why would anyone in the City want to behave so badly?
Sadly, following the Court of Appeal’s decision in Cavenagh v Williams Evans ( EWCA Civ 697) the answer is that it would be a very unwise employer who now opted for the neater option i.e. the payment in lieu.
The reason is simple – the Court of Appeal has decided that the well known principle enshrined in Boston Deep Sea Fishing does not apply if the employer was entitled to sack the employee under a payment in lieu provision. It would only apply if he summarily dismissed him with no explanation or on a trumped up allegation.
As a consequence, if the employer has indicated that he will make the payment in lieu when he terminates the employment then he is bound to pay him even if he then discovers he has had his hand in the till or, perish the thought, been manipulating the odd Libor.