Baha Mar's payroll service provider Strategic Outsourcing Incorporated (SOI) yesterday lashed out against the developers in Baha Mar's ongoing Chapter 11 bankruptcy proceedings, raising concerns of "unsafe work conditions" over the developers' inability to meet minimum wage requirements for its employees.
According to a declaration by Keith C. Owens, partner at Venable LLP, successor counsel for SOI, negotiations between the payroll services provider and debtors grinded to a halt over the weekend due to Baha Mar entity Northshore Mainland Services Inc.'s (Northshore) inability to commit to future payment deadlines for its workers.
"I advised Mr. [Tyson] Lomazow (counsel for Northshore) that unless the debtors immediately funded the minimum pay for the pay periods ending July 10 and July 18, 2015, respectively, and agreed to permit SOI to terminate the service agreement if the debtors fail to pay the full amount of payroll not later than the Tuesday immediately following the Friday upon which payroll becomes due, as set forth in the draft stipulation, SOI could not agree to further delay resolution of this issue.
"This is particularly the case because the debtors' inability to fund payroll as required under the service agreement exposes SOI to potential claims and puts SOI's licensure at risk," reads Owens' declaration.
The declaration holds that Northshore and its affiliated debtor entities in the Chapter 11 cases failed to advance the necessary payroll funds to SOI for the pay period ending on July 4, 2015. The court initially ruled on July 9 that Northshore could not force SOI to fund the debtors' payroll before granting them sufficient funds.
Following a hearing on July 10, Owens stated that the parties' counsel discussed the possibility of SOI processing a minimum wage amount for Baha Mar employees to tide workers over during the dispute.
Janet Gertz, of Cooley LLP (SOI's previous counsel), reiterated that SOI would not provide a financial accommodation or loan in the matter and questioned whether the debtors would be able to provide SOI with funds to meet Baha Mar's minimum wage requirements.
"SOI, through counsel, reiterated its concern that if the debtors did not have ability to fund even the minimum wage, it raised questions about unsafe working conditions, being precluded from obtaining workers' compensation insurance, violations of applicable law, among other things," states Owens' declaration.
According to the declaration, Baha Mar's counsel warmed to the idea of SOI processing the minimum wage payroll, provided that Northshore also pay SOI enough to cover minimum wages, the costs of taxes, and medical costs. SOI responded with a stipulation that SOI would provide payment for both the July 4 and July 18 pay periods on the condition that the parties terminate their service agreement should the debtors fail to pay all required wages for all future pay periods.
However, Baha Mar's counsel responded with an amended stipulation removing "virtually every one" of SOI's required stipulations - namely Baha Mar's future requirements to doll out full worker salaries for all payment periods after July 24 - with, according to Owens, no justification. In fact, the debtor counsel's revised stipulation completely removed any reference to payment plans beyond July 18.
Instead, Lomazow, of law firm Milbank, Tweed, Hadley & McCloy LLP suggested that the parties delay payroll matters until their individual due dates, which Owens argued would create an "unnecessary crisis situation for employees".
Lomazow maintained that Baha Mar is currently unable to fund more than the minimum pay obligation for the week of July 10, is outright unable to even make minimum pay for the following week and further suggested that Baha Mar defer payment for the July 18 pay period until July 24.
U.S. bankruptcy Judge Kevin Carey last week blocked an attempt by Baha Mar Ltd. to force SOI to meet the developer's payroll needs before Northshore covers its payroll.
The court yesterday continued the hearing on Northshore's emergency motion and addressed other relief requested by SOI, including a demand that the debtors provide SOI with assurance of future performance under the parties' service agreement or relief from stay enabling SOI to outright terminate its service agreement.
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