Morgan Stanley won a court fight to overturn €1.4 million ($1.5 million) in deferred bonus payments given to a managing director who sued for the award after he quit to join one of his biggest clients.
The Paris court of appeals ruled against Bernard Mourad, saying the bank's cash and shares incentive programs "sought to ensure his loyalty in the long term." The judges said they were distinct from his performance compensation — covered by his salary and discretionary bonus.
As such, Morgan Stanley was allowed to make the disbursement of the deferred pay conditional on his employment at the bank at a given date "without this constituting an unjustified and disproportionate restriction on the freedom to work," the judges ruled.
The dispute has put the spotlight on a practice rarely challenged by leavers who often prefer to forgo deferred bonuses to avoid undue scrutiny as they start new jobs. In France, similar lawsuits have cropped up in recent years against BNP Paribas SA, Edmond de Rothschild and consultancy Bain & Co.
Morgan Stanley declined to comment beyond welcoming the decision. Mourad's attorney declined to immediately comment. Still, the outcome isn't likely to be final as the dispute is expected to go all the way to France's top court.
During hearings in the case, Mourad's lawyer, Eric Manca, has argued that the deferred bonuses were explicitly linked to performance and said France's top court prohibits requiring an employee to stay on in order to receive staggered payments for work he or she has already done.
But Morgan Stanley's claim that Mourad tacitly accepted of the rules governing the incentive programs that held sway with judges. The court of appeals on Thursday highlighted that Mourad had received emails and logged on nearly 100 times to a website detailing conditions for the company's deferred bonus plan.
The judges concluded that Mourad "wasn't unaware" of the impact quitting would have. It made him "lose his rights" to amounts the court considered hadn't been vested when he resigned — nearly €1.2 million in shares and €250,000 for another bonus.
Employment laws in France have become a regular grievance among Wall Street banks operating in the country. The issue has only become more prevalent since they started moving staff in Paris post-Brexit.
At a conference last month, the co-head of Goldman Sachs Group's Paris office urged "more flexibility" after describing France's labor market as "complicated."
As part of its legal dispute with Mourad, Morgan Stanley's team argued that his initial win in 2019 "impacts France's entire banking sector" and "causes concern at state level." They said the case "goes beyond the interests of Mourad and Morgan Stanley France."
Mourad left the U.S. bank nearly a decade ago to join telecom mogul Patrick Drahi. He didn't stay long at Altice Media and has worn many different caps since. He had a role in Emmanuel Macron's winning presidential campaign in 2017 and did a short stint at Bank of America Merrill Lynch in Paris.
