What happens to employees when a company goes bankrupt?
Recently, Fox News reported the dilemma faced by both business and employees when a large enterprise runs out of cash. While employees are usually worried about covering the bills, maintaining health insurance coverage and filing for unemployment, crew members onboard ships owned by Hanjin Shipping face much larger problems. Dozens of Hanjin ships holding billions of dollars in goods are anchored at sea, unable to come to port for fear of seizure.
Hanjin Shipping, the world’s seventh largest shipping business, has been faltering for months; now that they have actually gone for bankrupt, the South Korean business has 40 ships left stranded at sea. Those boats aren’t empty; current estimates reflect about $14 billion in inventory and a full host of employees as well. The ships are slowly going through their available food, water and supplies as the company struggles to find ports that will accept them – without seizing their assets.
Hanjin Shipping’s bankruptcy has left both employees and cargo adrift; the massive carrier ships are anchored offshore and slowly running out of food and water for the castaway employees. With no way to dock, those workers are stuck onboard the ship with no way to get home; the company has not revealed a plan to pay these employees or a plan for getting the workers back to their home ports. In addition to the employee crisis, each ship’s cargo holds are also bursting with consumer goods, from Nike sneakers to Samsung electronics, which may not make it to retailers in time for the busy holiday shopping season.
Why Can’t the Hanjin Ships Dock?
Hanjin is deeply in debt, to the point that they can’t actually bring the ships into ports; the company has not paid the workers who would normally unload the cargo or the rail and land shipping businesses that would deliver the goods to their destinations. The company fears that bringing these ships to port without paying the bills would result in the seizure of that cargo.
Those fears are well founded. At least one ship has already been seized for unpaid fuel debts, off of the coast of Long Beach California; this seizure came after a Federal bankruptcy judge ruled that the Hanjin ships could be seized by United States creditors.
According to National Retail Federation Vice President for Supply Chain and Customs Policy, Jonathan Gold, “Merchandise is in limbo at the moment and retailers are working hard to make sure it ends up on store shelves in time for the holidays.”
So far, Hanjin has enough capital to have four ships dock and unload in the United States, while almost a dozen other Hanjin ships are still at sea.
What about the Workers?
According to the International Transport Workers Federation (ITF), the remaining ships currently have enough fuel, food and water for the employees onboard, but Hanjin is already asking crews to conserve resources. The company is also making efforts to deliver supplies for those ships that are running out, according to a company representative.
Bankruptcy laws in some countries do allow governments to seize the ships and the merchandise they carry. As Hanjin Shipping goes through the process, the employees onboard its cargo ships are faced with more than the typical amount of uncertainty; they do not know when they will be able to come to port, disembark and return home or whether supplies will continue to arrive as promised.
The Hanjin Shipping bankruptcy raises significant questions about an employer’s responsibilities to employees when they are deployed to remote areas or performing at risk tasks far from home; who is responsible for safety and for getting those workers back home? The strange case of Hanjin Shipping is the first of its kind -- but may not be the last for the overcrowded and burdened shipping industry.
About the Author
Emory Clark is the lead attorney at Clark & Washington, LLC. Their Atlanta bankruptcy attorneys offer sound financial and legal advice in bankruptcy cases. Clark & Washington’s exclusive work on Chapter 7 and 13 bankruptcy cases allow them to advise and counsel their clients through each step of the process. Visit http://www.cw13.com/ to learn more.
(Source: Clark & Washington, LLC)
