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Employed by a Sprawling Multinational? Are You As Secure as You Think?

Those who work for large multinational companies often enjoy security, benefits and a breadth of opportunity envied by others. However, as a High Court case illustrated, complex corporate structures which span the world can lead to real difficulties in obtaining compensation in the event of a dispute.

Twenty-seven former employees of an international banking group claimed that they had wrongly been denied bonus payments following the 2008 financial crisis. They launched proceedings against seven of the bank’s subsidiaries, claiming more than $100 million in compensation for alleged breach of contract.

The workers were employed by two of the companies, one of them based in France and the other in America. On the face of the contracts which governed their bonus entitlements, the American company bore primary liability to make the payments and was thus the correct target of the litigation. However, it argued that the enormous losses suffered by the group during the crisis had left a negative balance on the workers’ bonus accounts and that nothing was payable.

The workers’ lawyers were concerned that the American company might not be in a position to satisfy a judgment if they won their case on the merits. They suspected that large sums of money had been transferred from the American company to other subsidiaries and, for that reason, decided to sue multiple defendants.

Following a preliminary hearing, the Court found that the American company had not transferred all, or substantially all, of its assets to two other members of the group. In those circumstances there was no serious issue to be tried as between the workers and those two subsidiaries, which were effectively removed from the proceedings. Another subsidiary had also wrongly been brought into the firing line and the claim against it was dismissed.