BUSINESS LAW CASE STUDY 2
1- Summarize and discuss the content of the article.
Answer: The article presented to us for the case study was about the circumvention of WPS system by companies for cheating their employees. The article first talks about how committed the Ministry of Human resources and Emiratisation UAE, is ensuring that the relation between employee and employer and labour rights are well preserved.
There is a system introduced by the Ministry of Human Resources and Emiratisation called WPS i.e. Wages Protection System, which is an electronic way of transferring salaries by allowing institutions and companies to pay salaries to labours through an agent like banks. The system was made obligatory in the year 2017 and now covers about 321,000 institutions. It was mainly introduced for maintaining the Ministry’s commitment of preserving rights. But through latest investigations by Gulf News team it was found that many companies almost about 50% small construction and transport companies in the UAE deceive the government’s system and pays their labours about 40% less salary than what’s due and later than the time allotted.
The article further goes about how the WPS system is compromised, it is described by an example, if an employee is hired with salary of Dhs 2000, then the company on records of WPS withdraws the actual amount and then gives their employee less than 40% of the salary. Gulf News investigated and interviewed some employees who were affected by this cheat and it was found that some stated saying that they never even saw their bank cards because it was kept with their boss and some also stated saying that their employer would go along with them to the bank for withdrawing the money and then would ask them for giving some amount out of it.
When this was brought in light, the Ministry warned and has decided to take severe actions against continual of such practices.
2- Discuss the ethical implications of the article in question from the context of a) religious principles, b) principle of rights, and c) Kantian ethics. Elaborate and discuss with examples and references.
Answer: Ethical implications of the article in the following contexts are:
a) Religious principle- In this principle we analyse a case to be ethical or unethical based on religious principles. The UAE government follows Shariah law that is based on Islamic principles, so according to Islam it is mentioned in the Quran Surah al-Mutaffifeen 83:1 and Hadith narrated by Muslim, that says “He who deceives us is not one of us,” this proves that cheating is not allowed in the religion. CITATION Isl09 l 1033 (Islamqa, 2009)
Also, Christianity one of the most widespread religions in the world says that “Whoever knows the right thing to do and still fails to do it, for him it is a sin” James 4:17. These verses also indicate that doing wrong to other is sinful. CITATION Bib93 l 1033 (BibleGateway, 1993) As this case talks about employers deceiving their employees we can conclude saying that according to religious principles this conduct is unethical.
b) The principle of rights- This principle is based on the rights of individuals to determine whether a conduct is ethical or unethical. According to the code of ethics of UAE, the government follows certain rules for professional ethical conduct which are:
1) Ethical conduct – “All public servants should adhere to strict ethical conduct both at work and off work”. CITATION fah10 l 1033 (fahr.gov.ae, 2010) As the government expects ethical conduct all the time and seeing the case given to us where the employers are deceiving their employees indicates unethical conduct which is a violation to the rule of ethical conduct laid by the government.
2)Human resources law- This law focuses on human element being the biggest investment which needs to be managed efficiently as it is the future of the nation, CITATION fah10 l 1033 (fahr.gov.ae, 2010) Here is an example explaining the human resources law, Kraft Heinz company which is rated very low by their employees for very long working hour complaints and another company called Belk, which has also received low rating from their employees who complain of underpayment. These two examples show that the two companies are not looking well after their human resource element, which is violation to the Human resources law mentioned above. Comparing with the case given to us, we observed that companies conduct towards their employees is not leading to their wellbeing and in no way developing their skills nor making them efficient, rather the conduct makes it more difficult for the employees to improve, which again is violation to the human resource law. 3)Fraudulent activities- This rule talks about how it is important for the employees to report any misconduct or fraud behaviour observed because through the “UAE Commercial Fraud Law” which talks about prevention of fraud in commercial dealings. CITATION Mah14 l 1033 (Mahmood, 2014) The circumvention of the WPS system shows the deceive practices of the employers cheating their employees for their rightful dues, which is a violation to the Commercial Fraud Law.
4) Right to equality- the law says that all the citizens are supposed to be treated equally regardless of their status, gender, age, etc. According to UAE code of ethics “Government entities are obliged to treat all employees fairly and equitably, without unjustified discrimination”. CITATION fah10 l 1033 (fahr.gov.ae, 2010) This right is violated because the lower level labours who don’t have a lot knowledge about ATM cards were manipulated, because of their status of being poor they were considered as easier target to fool. This conduct is unethical because of violation of the right to equality of these labours. An Example from a company that is successfully practicing this approach of preserving the equality rights of their employees is, Accenture a professional consulting company ranked as one of the best companies in the world to work for on the basis of equality, the company’s strategy is that discrimination between employees based on religion, gender, age, ethnicity, status etc is not right and they try to build an environment that nurtures diverse working culture.
5) Contract Law- This is a law reinforced by the UAE government for ensuring contracts which are made as an agreement between two or more parties regarding a matter are protected and the parties involved are treated fairly if the contract is violated. (LawTeacher, 2013)
Example Employment contract that details the employer and employee relationship. This law is violated because in contracts and WPS system the companies have registered the original amount of salary and they withdraw the amount that is due but after withdrawal they are dishonouring the contract by paying less than what is originally due.
c) Kantian ethics- The theory is developed by Philosopher Immanuel Kant, this theory basically says if everyone in the society was to do the same, will it be good? CITATION csu18 l 1033 (csus.edu, 2018)The case given to us talks about how employers cheat on their employees for getting cheaper labour and personal benefits, if every employer was to do the same in the society then it will lead to certain problems:
Employees losing trust in their employers because the employers are taking advantage of the weakness of these blue-collar workers i.e. the fact that most of these workers don’t have much knowledge about the banking systems, nor ATM cards and, they don’t know about their rights.
Downfall of businesses- Example- When ZARA was not paying their Turkey factory labours for months and then abruptly closed the factory which lead to unemployment, after which their customers were against their behaviour and ZARA witnessed low sales in 2017. CITATION Jas17 l 1033 (Garsd, 2017)Poverty rates, GDP and Economic growth-
Talking about countries with high poverty rates it was found that some of the main reasons behind the poverty are
1- Unequal distribution of wealth- which means that wealth is distributed unequally in the country, rich becomes richer. The rich contribute to only about 1/3rd of the population and they hold more than half of the wealth in the country, while poor become poorer.
2- More corruption (less transparency)- Dishonest conduct by those in power, it was found through the CPI (corruption perception index- it ranks countries from 100 less corrupt to 0 highest of corruption) surveys that corruption rate directly links to the GDP and economic growth of a country, so countries ranked lowest in the CPI surveys for fraudulent and non-transparent practices are also the countries that are suffering the most poverty rates, e.g.: Somalia, it is ranked as 9/100 for corruption and also is one of the poorest nations in the world. CITATION Fab13 l 1033 (M.Suchankek, 2013)More African countries were found to be mostly corrupt compared to the Nordic countries and New Zealand which are considered the least corrupt countries in the world. CITATION Jor16 l 1033 (Connell, 2016)
When the same factors of corruption and unequal distribution of wealth were analysed in the low poverty rate countries it was found that these countries are maintaining low poverty rates because of their systems being more transparent, e.g. In Sweden people have easy access to official records. Also, these countries focus more on their human capital and look after their wellbeing. These analyses indicate that more corruption, and not investing good in human capital directly affects the GDP and economy and increases poverty and unemployment in the country.
Hence the effect of more people doing the same as mentioned in the case given to us of corruption will lead to more negative impact to the employees, businesses and country as found above, which makes this conduct unethical according to the Kantian ethics principle.
3- Using the utilitarianism method, discuss whether the case is ethical or not.
Answer: The utilitarianism method basically analyses the action based on whom it harms and who it benefits. If less people are benefiting from an action and more are harmed, then the action will be considered unethical or not right. The method follows few steps that are as follows:
Step 1- Identifying who will be affected by the action- In the case provided the employees, along with their families, employers, and the country have been affected by the action.
Step 2- Is the effect positive or negative? – The conduct of deceiving employees that too in lower level jobs who already have small salaries and taking some amount of it will make it difficult for them to manage their expenses for the next whole month, also the case mentions that employers while paying less also paid the salaries at least two weeks late or sometimes they would delay it for a month , which makes it even more difficult for these low income workers to manage their basic necessities. Also, an example mentioned earlier of countries like Somalia who have high poverty rates, low economic growth and low GDP, all because of their high corruption conduct. An example of similar case of ZARA (2017), the brand came into spotlight when customers in Istanbul found tags on their clothes saying “I made the item you are going to buy and I haven’t been paid for it”, ZARA had not been paying their Turkey Factory labours for a very long time and then they abruptly closed the factory leaving the labours unemployed. As the customers were made aware of this situation through the tags on their clothes, it broke the social media with the news spreading like fire and consumers asking for why aren’t the employees getting paid, on this the experts in the industry suggested that ZARA is in a big risk. Their act of not paying the employees lead them having to face backlash from customers, low sales and their ‘customer liked image’ was at risk and could result in greater loss if they didn’t fulfil their obligations towards their employees. CITATION Jas17 l 1033 (Garsd, 2017) These examples show that corrupt practices negatively impact not only the people suffering but also the country and the businesses.
Step 3- What is the majority vote (this is based on the no. of people affected)
The people affected by the conduct are:
The employees- The case states that about 50% of small private construction and transport companies engage in the fraudulent practice. Also, through expert statements where Ali Haddad Chairman at Lawyer Business group says that “its sadly the truth that half of small construction companies withhold ATM cards of their employees” and also the Gulf News interviews of several blue-collar workers stating that their “ATM cards remain with their employers”. This shows that a big part of blue-collar employees has been affected by the conduct.
The businesses- They have a positive impact because they are making profit by paying less and keeping the extra money and in the systems as they have withdrawn the correct amount, so it won’t even show them wrong. But they also will have negative impacts as seen in the case of ZARA.
The country- Such conducts as seen through cases of Somalia which has led to increase in poverty rates, which is directly proportional to the GDP and economic growth of the country. This means that corruption practice will lead to increased poverty rates, decreased GDP and decrease in the economy of the country.
Analysing the factors affected we see that large number of employees were negatively affected, businesses even though have short term positive impact but will face long term negative impacts and finally the country will be affected negatively as well because of decrease in their GDP and economic growth.
So, we can conclude saying that more harm has been done than good in the case given to us, hence the action is unethical according to the utilitarianism method.
BIBLIOGRAPHY BibleGateway, 1993. English bible. Online Available at: https://www.biblegateway.com/passage/?search=James+4%3A17&version=ESVAccessed 31 October 2018.
Connell, J., 2016. 4 reasons why Nordic countries have low poverty rates. Online Available at: https://borgenproject.org/why-sweden-has-lower-poverty-rates/Accessed 31 October 2018.
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M.Suchankek, F., 2013. why poor getting poorer?. Online Available at: https://suchanek.name/texts/poor/Accessed 31 october 2018.
Mahmood, 2014. Fraud and Deceit. Online Available at: https://www.stalawfirm.com/en/blogs/view/fraud-and-deceit-under-the-uae-law.htmlAccessed 31 October 2018.