Gulf Law at 7 Days 14 August 2016

Runaway bosses leave UAE staff in limbo

We look at the impact failed businesses can have on people
We look at the impact failed businesses can have on people

Jason is trapped in Dubai. Since his boss fled the country he has not received his wages and has borrowed Dhs10,000 to get by. And until his former employer cancels his visa, he cannot look for a new job.

He worked for a start-up for the past year, but now the logistics executive simply wants to return home.

Jason told 7DAYS: “One day I reached the office and was told our owner was in Germany and was not returning. I didn’t know what happened and why he went back but he owed a lot of money to other people and banks here.”

Jason’s monthly expenses include his Dhs2,000 monthly rent and Dhs2,000 on bills and food. He has borrowed about Dhs10,000 from friends and family so far.

After contacting his employer on Facebook, he said the German national promised to pay. Jason said: “He requested I do not complain [to the authorities] and said that he would give me my money soon.

“I have no money to pay for rent or food and cannot wait on promises anymore. I just want to cancel my visa and go back to start a new life.”

Jason is one of hundreds of workers facing a similar situation, according to diplomats and lawyers.

The Indian Embassy said it has seen a spike, mostly in Abu Dhabi. In most cases, it said, employees have not had their visas cancelled, meaning they cannot move on, and don’t have money to travel.

Screen Shot 2016-08-10 at 4.23.24 PMDinesh Kumar, First Secretary at the Indian Embassy, said: “Last year the total amount of complaints we received of a similar nature was 340, but this year we already had 300 by the end of July. If the same trend goes on, we may see the figure doubling by the end of the year.

“The number of complaints in Dubai remains stable with 1,500 in 2015 and 700 up to July this year.”

He added: “Most of these cases involve the owner running away, businesses being shut down or closing, in which case the employees haven’t been paid for months and cannot cancel their visas and leave. They are stranded. The majority of the complaints are around Abu Dhabi because a lot of small oil companies are based here and could be hit by the slump in oil prices.”

Coface, a valuation company based in Dubai, manages the credit worthiness of more than 20,000 businesses in the city.

It said, of the firms it evaluates, some 237 have seen the head of their company quit the country between the final quarter of 2015 and March 2016. This was without settling debts or cancelling its trade licence.

Barney Almazar, whose legal practice Gulf Law works with the Philippines Embassy, has taken on Jason’s case.

He said: “Some people have families and suddenly become jobless and don’t get paid. It is a difficult situation and can take at least a month to sort out.”

Failure to pay leads to domino effect

Massimo Falcione
Massimo Falcione

Every two days a business owner flees the country, according to analysis by credit valuation company Coface.

CEO Massimo Falcione said: “We have seen more than 200 ‘runaway’ cases in general trading, while the construction and IT sectors are also among the ones that shut down.”

Falcione said some firms were in trouble before the drop in oil prices, but that there was a domino after that.

He said: “Once the oil prices slumped, projects were delayed, commitments from different contractors were difficult to reach, workers were not paid, suppliers were not paid and credit from the bank started to shrink.”

The failure to honour debts is a criminal offence in the UAE, and owners often flee rather than find a way to pay.

Last November, Abdul Aziz Al Ghurair, Chairman of the UAE Banks Federation, told a news conference that the debts left behind from so-called ‘skips’ amounted about Dhs5 billion at the time.

Al Ghurair said banks will suspend legal action against SMEs struggling to repay debt for up to three months to prevent a surge in defaults.

“What we have put on the table is a mini insolvency law,” he told Reuters at the time.

“We will give the customer time and space as long as they’re genuine.”

He said the federation was lobbying the government to “expedite” a new insolvency law to help firms restructure.


Practices Areas

Gulf Law Consultancy FZ LLC is a limited liability company under the Fujairah Culture and Media Authority (Creative City).

This website is provided for general information purposes only and does not constitute any legal advice. It does not take into account your objectives, your instructions or all of the relevant facts and/or circumstances.

Gulf Law accepts no responsibility to any person who relies on the information provided on this website.