Davy must repay €260,000 in bonuses

THE High Court has ruled that Davy Stockbrokers should pay a former employee bonuses due to him.

Eamon Finnegan, who left Davys in 2000, claimed that the stockbroker withheld some of the bonuses he had due over the three years from 1997 to 1999.

Mr Finnegan joined Davy Stockbrokers in 1990 and worked as an equity research analyst before moving in 1995 to the equity dealing desk.

He said that he would be informed at the end of a year what his bonus would be and that it would be paid the following month.

The bonus payments contributed to a large part of Mr Finnegan’s overall remuneration at the time. His wife had just had their first child and he had also moved house.

However, Mr Finnegan said that Davys unilaterally changed the terms of paying his bonus in 1998 by deferring part of the payment for 1997 and would only pay it so long as he remained with the firm. This was also the situation for 1998 and 1999.

Mr Finnegan claims that when he left in 2000 to join rival stockbroking firm NCB, he was owed just over €260,000 from Davys.

Davy Stockbrokers had claimed before Mr Justice Thomas Smyth that bonus payments were there to incentivise staff and that the deferral systems was there to keep staff loyal to the company.

The bonus deferral system was introduce at the request of Bank of Ireland, which at the time owned 90% of the shares in Davy Stockbrokers.

Davys said that before the court that it was in Bank of Ireland that no employee received a bonus in excess of 100% of salary in a one or two-year period.

Mr Finnegan was paid a bonus of £3,000 (€3,800) in 1992, his first full year with the broker, this rose to £65,000 (€82,500) in 1998 and £140,000 (€177,000) in 1999.

In his judgement yesterday Justice Smith found that deferring bonuses acted as a financial restraint on employees moving to a rival stockbroking firm.

He said that Mr Finnegan could expect a bonus to be paid to him if he succeeded in contributing to the firm’s business, though the size of the bonus was discretionary.

He found that by deferring the bonus payments, Mr Finnegan was “indentured” to Davy Stockbrokers when the firm had no right to change the terms of Mr Finnegan’s contract unilaterally and ordered that Davys enter talks with its former employee to decide the amount due to him.

Mr Finnegan claims the total, including interest, is around €260,000.

Davys, the country’s largest stockbroking firm, could now face a raft of similar claims for other employees.