Arbitrate this

Looking for a group of people benefitting from Wall Street's credit crisis? Try lawyers who specialize in bonus disputes.

With layoffs continuing, bonuses shrinking, Bank of America Corp. swallowing Merrill Lynch & Co., and Barclays Capital Inc. taking over a chunk of Lehman Brothers Holdings Inc., the number of Wall Street employees seeking arbitrations against their broker-dealer employers is on the upswing. Through the end of August, new cases were up 39% for the year, versus the same period in 2007, according to the Financial Industry Regulatory Authority, which runs a dispute resolution forum. And the upswing is likely to continue.

Disgruntled employees can get remediation for such things as unfair compensation, wrongful termination and unjust enrichment of their employers. Historically, more than half these arbitration cases are settled rather than ruled, according to Finra.

Michael Deutsch, 41, a partner with Singer Deutsch LLP, a New York securities and employment firm started in 2003, has advised former employees of Bear Stearns Cos. on compensation arbitrations, and sees the Bear situation as a "blueprint" for what might happen with Lehman and Merrill. With Bear, there were significant layoffs by its new owner, J.P. Morgan Chase & Co., with rolling reductions in June and July. The process is still ongoing, according to Deutsch. Many former Bear employees, therefore, are looking to be fairly compensated for more than just the four months of work they completed for Bear in 2008 (Bear's calendar year began on Dec. 1) before J.P. Morgan's takeover in March, but for time spent at the firm's new owner, as well.

Deutsch says he has already begun advising Lehman employees, though he hasn't filed any arbitration cases on their behalf. In that situation, Barclays, in its purchase of Lehman's North American investment banking unit, said it hired more than 10,000 Lehman employees. However, that commitment lasts for only 90 days. "They have no obligation to keep these employees past 90 days," says Deutsch, and the 90 days run out right before bonus time. Barclays has earmarked $2.5 billion for severance and bonuses, but that pool may not satisfy everyone. "If you divvy it up, that disappears pretty quickly," says Deutsch.

Obviously, if an employee decides to stay at a firm, arbitration is probably not the wisest path.

"Yes, it would make working there hard," agrees Deutsch. But for those who are willing to leave their employers, or, more likely, those who have been laid off and are unhappy with their salary and bonus, arbitration offers a chance to hike up compensation. "A settlement can range from 6 to 7 figures, depending on the employee and their level," says Deutsch.

Bonuses are discretionary, but arbitrators realize that Wall Street compensation comes mostly from bonuses rather than salary, he adds. "Arbitrators have shown a desire to be fair to employees," says Deutsch.