CIBC Employee Class Action Lawsuit

Canadian Imperial Bank of Commerce (NYSE:CM)was hit with an employee class action lawsuit yesterday. The action is seeking a whopping CDN $ 600 million which at current exchange rates has approximately a 5% discount when converted to US$.

The action if successful would equal 25% of last years annual profits. There is some cause for concern.

The lawsuit relates to unpaid overtime allegedly forced out of approximately 10,000 current and former employees who performed duties as personal bankers (read front line tellers) Many of these employees are paid approximately $35,000 per annum so when you squeeze a nickle out of these folks it hurts real bad. There are so many of them that the nickels have added up.

CIBC has not commented as yet and probably will drag their feet as they work the legalisms to their advantage. It appears unlikely that the suit will be easily dismissed. The class action also will blaze new grounds as American Style litigation comes to a more staid Canadian Judicial System. There will be ramifications for other employers (banks and other companies) who have routinely engaged in similar practices.

The CIBC shareholder may find themselves hijacked as issues of labor and employee rights are fought on the platform of CIBC earnings which may or may not be available to shareholders.

This will not go away. The question is what will this do to costs and margins as court imposed judgements overtake management models. Consensus on earnings will need to be looked at quite closely.