Blow for ex-Dubai Bank workers in Sh44m salary push

Former employees of collapsed Dubai Bank have suffered a blow after a judge rejected their bid to be paid more than Sh44 million in salary dues after losing their jobs in August 2015.

The 44 former employees sued Kenya Deposit Insurance Corporation (KDIC) and the liquidation agent seeking to be paid August 2014 salaries plus terminal dues among other benefits.

Employment and Labour Relations judge Maureen Onyango rejected the claim saying KDIC and the agent Adam Boru were not in a position to pay the money, as they were ranked second to insured deposits, which had to be cleared first.

“I, therefore, find that the 2nd Respondent was insolvent and therefore there were no funds to be applied to payment of the monies owed to the Claimants as at the time that they demanded payment or at the time they approached the court,” the judge said.

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The court was told that as of August 2015 the bank had cash balances of Sh36.7 million against insured deposits of Sh123 million.

Mr Boru said the bank was owed a total of Sh4.1 billion made up of loans of Sh161.6 million, overdrafts of Sh3.9 billion, and staff loans of Sh26.6 million.

He said by January 2017 he had managed to pay Sh54.6 million out of the insured deposits, leaving a balance of about Sh68.4 million.

The judge said the fact that there were no funds to pay the former employers at the time of moving to court does not mean that they are not entitled to payment should the liquidator be able to collect sufficient funds to pay off the insured debts.

“The Claimants still rank second in priority after the insured deposits and are entitled to payment should there be any funds available after payment of insured deposits,” the judge said.

The Central Bank of Kenya (CBK) shut down Dubai Bank in 2014 citing serious cases of parallel banking, a mountain of unsecured loans that were not being serviced, interference with client accounts, and overstating of cash balances.

The former employees sued the KDIC demanding August 2015 salaries, unpaid leaves as well as salary in lieu of notice. They faulted the bank for terminating them without notice as required by Employment Act.

KDIC opposed the case arguing that the only amount payable to the former employees as per the Kenya Deposit Insurance Act, are salaries only.

Mr Boru said KDIC is not under any obligation and has no liability to pay leave days, salary in lieu of notice, and terminal dues as these payments are not applicable when an institution is under receivership or in liquidation.

The court further heard that the Act has clear provisions on the recovery, collection, and order of priority in paying out any monies by financial institutions under receivership.

The former employees had tabulated each of their entitlements totaling Sh44.7 million.