Ronald and Labour

I will tell you what happened.  You take from my story what you want.  Feel free to discard the rest.

In late 1980, I was in the last of my four years as Magistrate, Registrar of the Supreme Court, and Registrar of Companies of Anguilla.  Reginald Lucie-Smith was the Attorney General, and at that time the only other lawyer besides me in the public service.  Ronald Webster’s party was victorious at the polls.  He was the new Chief Minister.  He dropped into my office at the Courthouse unannounced.  He explained that he had a little job for me.  Reggie was on vacation.  In Reggie’s absence, Ronald decided that he wanted me to draft a law for him to make trades unions illegal in Anguilla.

His mind was on St Kitts and Antigua.  During the 1940s, 50s and 60s, strong trades unions were, with the help of the British Labour Party, established in those islands.  They formed political parties and sought political office.  They were successful and pervasive.  It took some forty years before any other political grouping challenged their hold on power.

Ronald was determined not to allow this to happen in Anguilla.  He had previously been forced out of office by a splinter group of his party.  He considered he had crushed them in the general elections of earlier that year.  The tourist industry was beginning to take off in Anguilla.  More and more workers were going into that industry.  He was concerned that they might become organised.  He recognised that worker organisation might pose a threat.  He feared trades unionism becoming a contending political force in Anguilla.  His solution was to pass a law banning trades unions.  I told him I would have a go at drafting it for him.

After a few days, I went to see him empty handed.  I told him that I had done the research.  Britain had signed up to a Geneva Convention that made it illegal for a country to criminalise trades union activities.  The Constitution was against him.  It protected the fundamental right of Anguillians to associate together in unions.

Ronald was not fazed by my failure.  He had a back-up plan.  He would create a Labour Department that would be so pro-worker that no trades union would ever be needed in Anguilla.  He would make sure that his administration was so protective of workers’ rights that it would never occur to them to form a union.

And so was born the Labour Department Act and the Fair Labour Standards Act.  Ronald next secured the passage into law of the Social Security Act.  Employers and workers contribute to a fund.  The fund provides sickness benefits and pensions to workers in the private sector, like the arrangements then existing only for public sector workers.  And so, Ronald accidentally completed Anguilla’s workers’ protection scheme.

Minimum Wage Law

Until about the year 1978, Anguilla offered its people little by way of wage labour.  The first modern hotels (as distinct from family-owned and -run guest houses) were Cinnamon Reef, Cul de Sac and Malliouhana.  These pioneers were obliged to train their own labour force, since there was no previous hospitality industry to do so for them.  Indeed, Leon and Lyane Royden famously bought the Cul de Sac hotel from the aging Ruth Goodnow to use as a training school for their staff for their soon-to-be-opened Malliouhana Hotel.  Once the Malliouhana opened, they sold the Cul de Sac as no longer needed.

Hotel workers accepted whatever salary was offered by these early employers.  Previously, the women had been unemployed housewives, or, in the case of the men, salt pickers, fishermen and construction workers.  If the wage offered was unsatisfactory, the worker could always resign.  There were plenty others to take his or her place.

As the years passed, a corps of trained front office, housekeeping, and restaurant staff grew in the island.  Grumbling began about wages and other work conditions.  Starting in the mid-1980s, political parties seized on the minimum-wage issue for electioneering purposes.  Both the island’s two main political parties took up the refrain.  They both promised to introduce minimum wages during their term of office.  Despite setting up committees to conduct research and produce reports, nothing concrete came of it.

What was preventing the passage of the appropriate law?  The cynic answers that the big hotels were major contributors to party campaign funds.  In this way, they captured each administration.

A little research reveals another kettle of fish.  It seems that the major (foreign-owned) hotels pay well above the average, when share of gratuity is factored in.  Every hotel and restaurant guest pays a 10-15% tip, service charge or gratuity, on top of their bill.  This money is typically pooled and controlled by a workers’ committee at each place of employment.  The gratuities are usually distributed to the workers on a point-based system.  This share of gratuity forms a substantial part of each worker’s remuneration.  In many months, I understand, it exceeds the basic pay.

Many locally owned hardware stores, groceries, restaurants and guest houses are fair and generous to their workers.  But there are exceptions.  Here is where most employee complaints come from.  Foreign hotel owners don’t have the vote.  Local employers do.  Guess which ones each government is more afraid of offending by introducing minimum wages.  Each time there is an initiative to introduce minimum wage legislation, it is lobbying by local employers that stops progress.

The Gig Economy

Ronald’s intention was to have the Labour Department stand between worker and employer, and always favour the worker.  To this end, mandatory mediation and conciliation procedures were introduced by his new labour legislation.  A Labour Commissioner was appointed, empowered by law to descend on any allegedly offending employer and demand to see the books.  The Labour Commissioner could disrupt the work of the employer and call meetings of the workers.  Through “conciliation” the Commissioner could persuade employers to make concessions satisfactory to the workers.

If the Labour Commissioner was not successful in mediating the dispute, there was a statutory provision for the Minister of Labour to intervene to “conciliate” the dispute.  The Minister of Labour was usually the Chief Minister, a powerful office.  The Minister of Labour was the person who issued work permits, a necessity for foreign-owned hotels and restaurants.  There were occasions when members of staff were dismissed for gross misbehaviour such as stealing, and either the Labour Commissioner or the Chief Minister forced a backdown and reinstatement of the worker.

Due to these and other abuses, employers cast about for a method to free themselves from the more tiresome aspects of local labour.  Replacing them by foreign labour was not a good solution.  The Minister of Labour could not always be persuaded to issue the needed work permit in time.  The solution hit on was to alter the relationship between worker and employer so fundamentally that the oppressive provisions protective of workers no longer applied.  Convert long-term employees into short-term employees on annual contracts.  At the beginning of each new tourism season, make previous employees apply for employment afresh.  They might or they might not be offered employment, on the same or different conditions.  This solution required official approval, or at least condonation.  Some foreign employers got it.

Anguilla is not the first country to find employers replacing full-time staff with short-term contracts, usually of one year.  This arrangement is often referred to as the “gig-economy.”  A gig, an abbreviation for “engagement”, originally described short-term employment in the entertainment industry.  A musical band going on tour would require temporary electricians, stage carpenters, and electronic technicians, to accompany them.  They were said to be doing a gig.  At the end of the gig, these short-term employees would be released from their employment.  A gig worker was not a permanent employee, but instead classified in employment law as an independent contractor.  Consequently, there were no pension costs or holiday pay obligations as with permanent employees.  Unless the Social Security Act was amended, as was done in the UK but not in Anguilla, there was no obligation for the employer of an independent contractor to contribute to the social security scheme.

Slowly, hotel by hotel, Anguillian hotel workers were re-classified as “self-employed” and placed on one-year or shorter contracts.  Any recalcitrant worker need only be endured until the end of the contract and then, without risk or cost, be permanently let go.  The fierce anti-firing procedures originally developed by Ronald became redundant. 

This arrangement is of no benefit to the worker.  It is solely created for the benefit of the employer.  It does not benefit society.  In the event of termination after several years of steady employment, no severance-type benefit applies, since this was merely an annual contract.  If the hotel is sold, the new owner is not obliged, as the law requires for permanent employees, to take on the employees on the same or better terms, since these are annual contracts. 

This annual contract arrangement would be illegal under the provisions of the Fair Labour Standards Act, if the Act was strictly enforced.  The Act was quietly ignored.  There was no trades union to take up the interests of the workers.

Government squeezed one concession out of the major employers.  Without special provision in the law, an employer of an independent contractor is not legally obliged to pay social security contributions.  No such provision was made in the law in Anguilla.  Even though it was not strictly legally required, the short-term contract employers in many cases agreed to continue to make the social security contributions in return for enjoying the benefits of being able to classify their workers as independent contractors and not as employees.  And so, with a minimum of expenditure and cost, most of Ronald’s scheme for protecting Anguilla’s workers was dismantled.

The new Labour (Relations) Act of 2019 is touted to bring changes to employer/employee relations in stages in the coming years.  Will it bring real reforms to Anguilla?  Or, will it become dormant like so many other legislated social reforms before it?

Anguilla's Slow Recovery

The US swiftly recovered from the 2008 financial crisis mainly due to quantitative easing, when the US Treasury printed hundreds of billions of dollars to pump into the stock market. In Britain the Bank of England printed money for government to buy up the failing UK banks. By contrast, in Anguilla the Eastern Caribbean Central Bank and the local government stood by as the two domestic banks continued to lend hundreds of millions of dollars to borrowers who would never be able to repay their loans  The shareholders had no idea what was going on.

The National Bank of Anguilla (NBA) was held by 4,000 shareholders in an island with a population of 14,000. In 2008 its assets stood at over EC$1 billion. That was the last year the bank held an Annual General Meeting of its shareholders.

In 2008 Flag Luxury Resorts, the major real estate development company on the island, collapsed. When its 400 workers were sent home, approximately 25% of the private sector became unemployed overnight. Loans that had previously been faithfully serviced immediately became bad loans.

2008 was the last year that NBA published its accounts. No annual general meeting was held after that date. It was rumoured the Central Bank had rejected the company’s accounts. No explanation was forthcoming.

In 2013 the Central Bank moved in on NBA and another private bank putting them into conservatorship. The uncomprehending islanders were told it was to save the banks. Local deposits were safe. By contrast, the international depositors in the seized banks were not so lucky. They had no access to their funds amounting to many tens of millions of US dollars. The result is expensive litigation in the courts of Anguilla and New York.

In 2016, government announced its banking solution. The good assets of the two banks were transferred to a new bank with government as its sole shareholder. The bad assets were transferred to an asset management company which would try to collect.

Prudential guidelines mandate that no more than 5% of bank loans are permitted to be in default. By the time the Central Bank moved in 2013, some 50% of NBA’s $1 billion in loans were non-performing. At all times, the board of directors were well aware of this. Only one of them resigned.

When asked why they had taken no steps to collect on the bad loans before the Central Bank moved in, the directors privately explained they were between a rock and a hard place. If they wrote off the bad loans and placed the debts in the hands of the lawyers, half the capital of the banks would be written off. The sale of the loan securities would ruin the defaulting borrowers. The borrowers were their ex-schoolmates, if not their brothers and sisters  With the collapse of Flag, the market for real estate was depressed. Nothing could sell. Further, the law protecting borrowers was so restrictive that the banks had no chance of selling the securities to repay the bad debts. That was the rock. The alternative was to continue as before, hope the economy would turn around, and all the bad debts would become good once again. This was the hard place. The banks might be lost, but there was no downside for the directors personally. They chose this option.

Up to today, not even the names of the major defaulters are published so fingers can be pointed. They continue to sit in the front pew in church, and to take the head of the table at social events.

It gradually dawned that there was no question of punishing any of the management or the directors of the two closed down banks. Whatever investigations took place, government kept the results secret. We were told that people’s banking business was confidential. The result was that no one went to gaol. No one got sued. After all, any negligent bank officers and directors are close family and associates of legislators, ministers, Permanent Secretaries, and senior police officers. There will never be any report on who was to blame for Anguilla’s fall from financial grace. No one will ever be punished for the loss of the banks.

Gradually a palpable sullenness has come to dominate the mood of most Anguillians. The lack of confidence of Anguillian society in its leadership is as thick as cold porridge.

We hear on the radio complaints that the EC$800 million public debt will burden generations-to-come. We hear from lawyers that the confiscation of the international depositors’ funds will kill confidence in Anguilla’s banks. Anguillians’ eyes glaze over as we listen even without taking it in.

We hear the loudest voices on radio talk-shows warning of coming Armageddon. Loudmouths spout obviously made-up conspiracy theories. Some of the worst of the defaulting borrowers have led what little protest there has been against the way government took over the banks. Their brazenness contrasts with the humility of the average Anguillian left to contemplate the unexplained loss of their nest eggs of investment.

Meanwhile, Anguillians who previously held EC$1 billion in bank capital now hold worthless shares in the old banks that have been stripped of their assets. Only the receivers benefit from the continuing liquidation of the two banks at the rate of hundreds of US dollars an hour. Soon there will be nothing left. The 5,000 Anguillians who held some EC$30 million in an earlier failed investment company promoted by NBA can only shake their heads in pain as the directors continue to pretend to be directing.

In September 2017 Hurricane Irma wiped out our private and public infrastructure. The total damage suffered is estimated to be close to EC$900 million dollars. Anguillians got up and dusted ourselves off  Mainly using our private resources, we rebuilt our private properties. We were called resilient. Perhaps we were just numb from the earlier financial beating we suffered. We shareholders lost a billion dollars with the 2013 collapse of NBA alone.

Local hardware stores and supermarkets become more and more run-down, as Chinese financed replacements flourish. Since 2008 several hundred Chinese migrants appear to have benefited from our liberal work permit policy. On every street corner, new Sports Bars bearing bright signs illustrated with paintings of scantily dressed ladies on them flourish. They employ large numbers of desperate Venezuelan and Santo Domingo girls imported with the permission of an acquiescent government. Disillusioned Anguillians walk past these new business opportunities every day on our way to church or work.

The one bright star was the Social Security Fund. The Board holds the monies in the Fund in trust for the workers of Anguilla to whom the benefit of the monies belong. The monies are to be invested so the fund grows and produces profits for future generations to benefit. The most sacred duty of a Social Security Board is to protect the Fund against attempts by desperate governments to dig their shovel into it  Government has an unlimited number of worthwhile projects for the public good that need funding.

So, it was as if an anaesthetising hypodermic needle had been inserted into our collective spines when earlier this week we heard a government minister claiming proudly on radio that he had convinced the Anguilla Social Security Board to let him have $5 million (US or EC was not revealed) of the Fund to invest in purchasing private land to enlarge his favourite public project in his constituency. The Board has not confirmed this is true. The Board has not said it is not true. Clearly such a use of Social Security funds will produce no income and is not a real investment for the benefit of the workers. Even though the payment was legal, it is a shocking betrayal of the workers. It is a dangerous precedent. This is how the run on Social Security starts. It starts with $5 million. Then, $10 million is needed for something else. The law is changed to make it possible. Anguillians are paralysed by fear at the prospect. If the Fund can be so easily dipped into by one smooth-talking minister, then nothing in Anguilla is sacred any longer. All is lost.

Now government has announced that it has committed to selling the major part of its shares in the national electricity company, the water company, and the new bank. These are all exciting new opportunities we are told. We shake our heads in disbelief on hearing this. The blows we have received over the last decade have drained us of resources. We have no money left over to invest in these projects. We are not just dispirited, we are gutted.

It is incredible that anyone would believe that Anguillians would take another chance of investing our remaining savings in any local public company ever again. The Chinese will have to be invited in if government is to have any chance of unloading its shares.