Financial services firms feel economic and legal pinch

Executive litigation is likely to increase as companies seek to preserve profitability in a tougher economic climate by altering employee remuneration schemes, according to boutique employment law firm Harmers.

The Sydney-based law firm urged employers to check the legal ramifications of altering employee contracts before attempting to do so as litigation is becoming increasingly commonplace — and can be very costly.

According to Harmers managing partner Joydeep Hor, financial services firms are likely to be at the greatest risk of such litigation as many are already feeling the pinch of the economic downturn and employees, particularly senior executives, often have complex remuneration contracts involving bonuses, incentives and shares.

“Any unilateral amendments to [employee] contracts will certainly cause some contention … and financial services firms need to be particularly careful with how they manage these contractual changes,” he said.

According to Hor, disputes under section 53 of the Trade Practices Act (1974), which prohibits misleading representations by employers over remuneration, are becoming increasingly commonplace, with most threatened disputes falling under that section.

“The legal risks involving senior company executives who believe they have been unfairly treated by their employers are now greater than ever,” he said.