Ex-honestbee staff in separate entity seeking unpaid wages

Singapore

SOME former employees of honestbee who had their employment contracts transferred in November to a separate entity owned by former honestbee chief executive Ong Lay Ann have filed claims against Fundeology Pte Ltd for unpaid salaries, The Business Times has learned.

Those whose employment contracts are under Fundeology "will not be entitled to any liquidation proceeds of honestbee", the startup's liquidators from BDO told BT.

As of July 27, the salary claims of 40 former employees of Fundeology have been referred to the Employment Claims Tribunals (ECT) a Ministry of Manpower (MOM) spokesperson told BT.

Several Fundeology ex-staff who spoke to BT said that Fundeology owes them about two months of salaries. honestbee itself does not owe them outstanding salaries, they said.

These ex-employees said that in November last year, they were asked to resign from honestbee and sign a new employment contract under Fundeology, with their job scopes remaining unchanged.

Two sources estimated that about 80 honestbee employees, comprising Singaporeans and permanent residents, signed the contracts with Fundeology in November last year. Most were later retrenched in March, around the time honestbee lost the support of key investor Brian Koo.

When asked about the rationale for transferring employees to Fundeology, Mr Ong said the entity was used as a manpower outsourcing arm supplying labour exclusively to honestbee.

He confirmed that all of honestbee's Singaporean and PR employees were transferred to Fundeology in November. This was prompted by technical issues surrounding honestbee's foreign worker quota, he said.

Fundeology will be filing a proof of debt to honestbee's liquidator and will rank as an unsecured creditor. In the interim, it has worked with the authorities and reached a resolution for about three-quarters of affected employees, Mr Ong said.

"The company continues to reach out actively to the unresolved cases to seek an amicable resolution. The settlement offer and amounts outstanding are confidential," he added.

Four ex-Fundeology employees told BT that the company had offered them S$1,000 each, regardless of how much they were owed.

Regulatory filings show that Fundeology was incorporated in May 2018 and counts Mr Ong as its sole shareholder and director. It has a paid-up capital of S$50,000.

Some Fundeology ex-employees told BT that they signed the new employment contract with the understanding that it would hold honestbee's restructured business. At that time, honestbee still appeared to be receiving support from its long-time investor Brian Koo, and prospects for restructuring seemed better.

However, the restructuring bid was dismissed by the Singapore High Court in March, and honestbee was hit with a winding-up order in July.

Why did the employees agree to sign the new contracts with Fundeology?

One of them told BT: ''My understanding was that Fundeology was a special purpose vehicle to provide labour to honestbee, and to eventually be an entity for the restructuring. There wasn't much difference from my original contract and I don't think anyone else put up a fight about it.''

Another believed that honestbee would ultimately be responsible for the salaries of Fundeology employees. A third ex-employee had genuinely hoped that honestbee would successfully restructure and did not anticipate the liquidation.

It is important to be cautious when signing a new employment contract, particularly under distress situations, lawyers told BT.

Justin Chia, head of restructuring and insolvency at Harry Elias Partnership, said that employees of distressed firms asked to sign a contract with a new entity should consider whether the entity ''may be negatively impacted by financial difficulties faced by the original company, or plagued with similar issues of poor management later down the road.''

Ian Lim, a partner at TSMP, added: ''Employees have to be careful and should ideally do their own checks on the viability of the new company, for example, whether it has lower or minimal paid-up capital as compared with their current employer.''

As of July 27, the Tripartite Alliance for Dispute Management (TADM) had received claims for unpaid salaries from 48 former Fundeology employees. Of this group, 46 went through mediation, but 40 of them were unable to reach an agreement on a repayment schedule. Their cases have been referred to the ECT for adjudication, with hearings scheduled from mid-August. Of the other six Fundeology ex-employees, four withdrew their claims after reaching an agreement with the company, while two did not pursue the matter.

Beyond Fundeology, over 100 employees under honestbee are also still owed salaries. According to MOM, 55 per cent of the total sum is still outstanding.

How much priority honestbee employees' claims will be given in liquidation is not straightforward. For one, they would not have priority over any secured creditors with fixed charges. ''(Employees) still rank quite high up the priority chain though, ahead of floating charge creditors, unsecured creditors and shareholders, for example. But employee claims are not 100 per cent protected. In the case of wages, they are protected to the tune of S$13,000 or five months' salary, whichever is lower,'' Mr Lim of TSMP said.

As of July 27, TADM received claims for unpaid salaries from 128 former employees of Honestbee Pte Ltd. Of these, only 15 employees, who filed their claims last year, have received repayment in full. Another 45 employees who also filed their claims last year have received 80 per cent of their claims. Meanwhile, 59 employees who lodged claims just before the firm was hit with a liquidation application have not received any payment. Eight former honestbee employees have withdrawn their TADM claims after reaching an agreement with the company, while one did not pursue the matter further, MOM said.