Lax & Neville has obtained a settlement for a managing director of a New York hedge fund in what the United Stated District Court for the Southern District of New York described as a “bitter employment dispute.” The managing director was forced to bring a claim for breach of contract, unjust enrichment, and violation of the New York Labor Law (“NYLL”) after his former employer terminated him without cause and refused to pay him more than $3 million in earned compensation.
The parties reached a settlement after the District Court denied the hedge fund’s motion for summary judgment. The hedge fund had sought to dismiss each of the managing director’s claims on various grounds, but primarily argued that the NYLL claim should be dismissed on the ground that carried interest and performance bonuses are not “wages” under the statute. Relying upon clear precedent in the New York Court of Appeals and Second Circuit, the Court held that “although ‘incentive pay’ like the disputed bonus amounts in this case ‘does not constitute a wage until it is actually earned and vested,’ when it is ‘guaranteed under [a] formula to be a percentage of the revenues . . . generated’ and ‘not left to [the employer’s] discretion,’ it constitutes protected ‘wages’ under the Labor Law.” (quoting Reilly v. Natwest Markets Grp., 181 F.3d 253, 264-65 (2d Cir. 1999)). The District Court allowed the managing director’s claims, including for liquidated damages, prejudgment interest, and attorneys’ fees under the NYLL, to proceed and ordered the parties to prepare for trial. The parties settled shortly thereafter.
Courts and FINRA arbitration panels have considered the applicability of the New York Labor Law to brokers and other financial services professionals in several recent cases involving attempts by financial services firms to evade deferred compensation and bonus obligations to their former employees. Lax & Neville has extensive experience helping professionals in the financial services industry enforce their rights under the New York Labor Law in FINRA, state and federal court, and AAA and JAMS arbitrations. For a free consultation, please call (212) 696-1999.