The Tribune

• Bahamians hit by foreign entities going ‘belly up’

• Club Land’Or scenario leaves workers ‘nothing’

• TUC chief renews Redundancy Fund, bond call

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Hotel managers and their union have now been waiting “almost three years” to recover a collective $821,292 allegedly owed to them by a shuttered Paradise Island resort, it was revealed yesterday.

Obie Ferguson QC, the Trades Union Congress (TUC) president, told Tribune Business that the only means the Bahamas Hotel Managerial Association (BHMA) and its 20 members have to recover what is due to them is via the Supreme Court-approved liens attached to the property’s sale.

This would ensure a portion of the purchase price paid by any buyer would be used to compensate the union and its members for unpaid wages, severance and other benefits, as well as outstanding dues and other fees, which he described as their last resort to recover what is owed.

Speaking after former Club Land’Or employees earlier this week revealed their multi-year struggle to obtain what is due to them, Mr Ferguson described the situation as “almost the exact same scenario” that befell former Royal Oasis employees when the property closed in September 2004 and then-owner, Driftwood Freeport, abandoned The Bahamas leaving behind $22m-plus liabilities and unpaid bills.

Noting the similarities now playing out at Club Land’Or, the TUC president renewed his previous calls for the Government to mandate that foreign investors coming to do business in The Bahamas set aside what would effectively be a performance bond - held in escrow - that could be used to compensate employees and other creditors should they ultimately flee this nation and take all assets and funds with them.

Mr Ferguson, also a labour attorney, said he had been involved in several legal cases where Bahamian workers had been contractually employed by “shell companies” that have no assets in their name. When these businesses “go belly up”, and exit The Bahamas, he explained that there was “no value” in pursuing them via the Supreme Court or trade disputes because there was nothing left to claim against.

In Club Land’Or’s case, there is only the real estate left, forcing the workers to an uncertain and lengthy wait for that to be monetised so they can regain at least some of what is owed. Mr Ferguson said the case also strengthened his calls for the creation of a National Redundancy Fund, to which both employer and worker would contribute, so that Bahamians would have a safety net when companies fail to settle their bills before exiting the jurisdiction.

Affirming that he plans to pitch the Redundancy Fund idea to the Davis administration, Mr Ferguson said of Club Land’Or: “No effort has been made to pay the workers. We have tried every cranny. We’ve tried everything.” He added that the property’s owners had enticed staff to remain on the job by promising they would be paid what was owed, while making similar assurances and promises to the union, but they never delivered.

“We relied upon that, and communicated that to the members,” the TUC leader said. “Nothing has happened. The place is closed. We filed an action in the Supreme Court to make sure that, on the sale of the property, the workers would be paid. That’s the only guarantee they have.

“That’s why I’ve said that we in The Bahamas have to ensure that these multinational companies, when they come to The Bahamas to do business and employ Bahamian workers, they must put up a certain amount of capital to the satisfaction of the Government. Failing to do that, if the company goes belly up, the workers have nothing.

“They have no assets in this jurisdiction, and the average worker does not have the money to afford litigation or the research to track down their assets and property worldwide. That is tremendously expensive. If they come, they should be a company of means and put up a certain amount of funds to deal with foreseeable or unforeseeable situations that might occur.”

Investors and the private sector are likely to argue that mandating foreign companies lodge what is, in effect, a performance bond would be expensive, impractical and deter them from coming to The Bahamas. Club Land’Or, which is owned by Land’Or International, based in the US state of Virginia, had according to Tribune Business been a troubled resort for almost an entire decade prior to its closure with multiple legal disputes and claims of unpaid bills.

Robert Farquharson, the Government’s director of labour, said earlier this week that “a bankruptcy situation” is complicating efforts to ensure former workers are paid what is due. Besides the BHMA and its members, Mr Ferguson suggested ex-Club Land’Or line staff are likely to be owed a similar amount in collective wages and severance.

However, there is no guarantee that the liens secured by Mr Ferguson for the Association and its members will result in them being fully compensated. Any creditors’ queue will be headed by a secured lender, who will likely have a mortgage secured by a fixed and/or floating charge over the Paradise Island property.

The Government with its taxes, and the employees, will be the preferred creditors who come next but, depending on the sale/purchase price in any deal, they could end up with nothing if the secured creditor takes all the proceeds. Another possible outcome is that the employees get a percentage, or cents on the dollar, of what they are owed depending on the amount of funds available.

Club Land’Or’s location at the heart of Paradise Island, with its entrance immediately facing the Sir Sidney Poitier bridge exit and backing on to the Atlantis marina, makes it a valuable piece of real estate. The resort was once placed on the market with a $40m asking price pre-COVID, and Atlantis at one stage was said to be interested in acquiring it. That, though, never happened.

“The workers have lost their homes, have lost their mode of transport, have not been able to pay their children’s school fees and have been living mouth-to-mouth,” Mr Ferguson said. “With COVID coming in, it made it that much more difficult for them to survive. That’s the reason I said a National Redundancy Fund should be established.

“When things are going well, ‘X’ amount of dollars can be put in by the employer and the worker. We want everyone to participate, so that when crisis happen they have access to funds. People have a difficulty buying into it, but I hope this will permeate throughout the community and I want to put it to the new government to see if they will entertain something of this nature.”

The private sector will again likely see such a Redundancy Fund as increasing the cost of business further, especially with National Insurance Board (NIB) contribution rates set to increase at some point. They will also view it as a duplication given existing NIB benefits such as unemployment.

However, Mr Ferguson argued that situations such as Club Land’Or’s were happening “too often”. He said: “I can recall another scenario where I had to go to the Supreme Court to get an injunction just before the company was about to leave with no commitment to pay the workers. I got to the court in time, just before 5pm, and we were able to meet with the company and work out a separation package that was equitable given the situation.

“In The Bahamas, we have a lot of shell companies. The worker signs a contract with the shell company. The entity with the substantive holdings doesn’t allow the workers to be employed with it. I have had cases where I got judgments against the company in the Supreme Court, and when I went to try and enforce it, I was told they did not exist.

“That’s a problem. In my opinion, the Ministry of Labour should be more concerned with those types of situation. If they don’t have any assets, and go belly up, filing a trade dispute is of no value, going to the Supreme Court is of no value, because the company has no assets,” Mr Ferguson continued.

“In this case [Club Land’Or], the only asset left is the hotel. They have to sell the hotel for anything to happen. It’s been almost three years. There’s nothing we can do until there’s a sale of the property.”