The terms of a proposed class action settlement call for Merrill Lynch to pay $40 million to settle claims brought by approximately 1,400 brokers regarding deferred compensation that Merrill Lynch allegedly refused to pay the brokers after its merger with Bank of America.
Despite the large price tag, however, the proposed settlement may still leave claims with roughly 2,000 brokers unsettled, according to MSN Money. The brokers who are not party to the class action settlement would be left to privately pursue their claims against Merrill Lynch. The proposed settlement may still leave roughly 2,000 brokers to battle privately against the brokerage.
What is deferred compensation?
Deferred compensation is an arrangement between an employer and employee, by which a portion of the employee’s income is paid following the date on which the compensation is earned. Deferred compensation includes pensions, retirement plans, and stock options. The primary benefit to employees who receive deferred compensation is the deferral of taxation since the compensation is taxed on the date that the income is actually received by the employee and not the date on which the income is earned.
Why were Merrill Lynch brokers allegedly denied deferred compensation?
The business litigation stems from Merrill Lynch’s merger with Bank of America in September 2008. About 3,300 brokers left Merrill after the Bank of America deal, and thousands of Merrill Lynch brokers claim that they were not paid years of deferred compensation, some of which was held in brokers’ stock savings plans.
Merrill Lynch denied its former brokers’ requests for their deferred compensation following their departure from the company after the merger. Deferred compensation is generally paid after a broker has made a certain duration milestone of employment with the company, but it may also be payable if the broker leaves the company for “good reason.” Departing brokers argue that the merger with Bank of America constituted a “good reason” such that their deferred compensation became payable when they left the company.
What brokers are covered by the proposed class action settlement?
The proposed class action settlement does not cover former Merrill Lynch whose revenues exceeded $500,000 during a certain period prior to their departure. Those brokers who accepted bonuses from Merrill Lynch following its acquisition by Bank of America Corp. waived certain legal rights regarding deferred compensation claims and will also be excluded.
For more than 25 years, the Chicago securities class action law firm and Chicago unpaid overtime lawyers of Lubin Austermuehle has represented both plaintiffs and defendants in class action litigation in state and federal courts, in matters involving consumer fraud, unfair and deceptive business practices, and in a wide variety of state and federal statutory actions. Contact our office at 630-333-0333 to learn more about how we can help you with your class action litigation or securities litigation.