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Makcik Sia (not to be confused with her popular sister Makcik Kiah) works as a senior secretary at a large-scale law firm (“the Firm”). Her job isn’t The Greatest; it’s a typical 9-5, her colleagues are fun (except Fatimah, but then again no one really likes Fatimah) and most importantly, it pays the bills.
Since the 18th of March, the start of the MCO, she has been “working from home”. She doesn’t really have much to do because her Boss has not been getting new clients but she’s not complaining, as she has a lot extra time to catch up on her beauty sleep.
On the 3rd of April 2020, Makcik Sia receives an email from the Firm’s HR Department informing her that she has been retrenched as her position is now rendered redundant. Makcik Sia is overwhelmed with a thousand forms of fear.
What can she do? Can her employer retrench and/or terminate her because of the MCO?
Retrenchment & Redundancy 101
Retrenchment is a form of dismissal on the notion that the roles and duties of the employee has become redundant. Redundancy refers to a surplus of employees and is usually associated with the reorganization or downsizing of the business.
In these scenarios, the employer is entitled to discharge the services of some employees which had become excess ergo, Retrenchment. Hence, there must first be redundancy or surplus of employees before there can be retrenchment.
Guidelines on Retrenchment
The Code of Conduct for Industrial Harmony (“the Code”) is a comprehensive but not-exhaustive code of practice in Malaysia that lays down the principles and guidelines to both employers and employees on the practice of industrial relations.
The Code provides for some guiding principles an employer should adopt for cases of retrenchment. A rule of thumb is that an employer shall always consult the Union and/or Ministry of Labour and Manpower when dealing with this area.
The Code has quite a significant impact on the Industrial Courts especially when dealing with the subject of retrencment. In Chan Shy Yean v. Marcus Evans (M) Sdn Bhd [2016] 1 ILR 353 (Award No. 34 of 2016), the Industrial Court held:
[27] Under the said Code the company is required to consult with the claimant and Ministry of Labour and Manpower prior to the retrenchment exercise. It is incumbent upon the employer if the retrenchment exercise becomes necessary appropriate measures must be taken before hand to avert or minimise reduction of workforce and thereafter the company is required to give early warning to its employees amongst other useful guidelines set out therein. Many guidelines are stated therein and should be considered for fair employment practice. There is no evidence to suggest that the company in this instance complied with the said Code and its useful guidelines
In the case of Equant Integration Services Sdn Bhd v. Wong Wai Hung & Anor [2012] 3 MELR 339 it was held by the High Court that not only is a genuine substantive decision as to the existence of a redundancy required but also that any dismissal for redundancy must be carried out in a procedurally fair manner before it can be justified. In the Federal Court case of Said Dharmalingam Abdullah v. Malayan Breweries (Malaysia) Sdn Bhd [1997] 1 CLJ 646 it was held that a blatant disregard of the terms agreed in the Code would tantamount to the perpetration of unfair labour practice or even to connote mala fides
There are two other doctrines employers should abide by when retrenching which is “Foreign Worker First Out” and “Last In First Out”. The former means that employers should terminate the services of foreign workers first before contemplating local employees whilst the latter means that in instances where all considerations are equal, the employee hired last is to be laid off first.
Is Makcik Sia entitled to any benefits?
The retrenchment benefits and/or compensation would primarily depend on the terms of your contract. For employees who fall under the purview of the Employment Act 1955, i.e. employees whose salary are under RM2,000 a month or who are engaged in manual labour, you are entitled to the following benefits provided that you have been continuously employed for a period of not less than 12 months
What if Makcik Sia is dissatisfied?
An employee who opines that they have been unfairly retrenched must lodge a complaint with the Director General of Industrial Relations within 60 days from the date of the dismissal. Thereafter, a reconciliation meeting will be ordered by the Department of Industrial Relations where both the employee and the Company/Employer will attempt to resolve the dispute.
If that fails, the Minister of Human Resources may refer the matter to the Industrial Court which is a specialized court to determine whether the dismissal was tainted by any unfair labour practice.
In Kaolin (M) Sdn Bhd v. Samba Sirvang Thanimalai [2001] 1 CLJ 491 (HC) KC Vohrah J. held as follows:
Whether the retrenchment exercise in a particular case is bona fide or otherwise, is a question of factor of degree depending for its resolution upon the peculiar facts and circumstances of each case. It is well-settled that an employer is entitled to organize its business in the manner he considers best. So long as that managerial power is exercised bona fide, the decision is immune from examination by the Industrial Court. However the Industrial Court is empowered, and indeed duty-bound,to investigate the facts and circumstances of a particular case to determine whether that exercise of power was in fact bona fide. (Emphasis added)
In the Court of Appeal case of Bayer (M) Sdn Bhd v. Ng Hong Pau [1999] 4 CLJ 155 (COA), it was held that the burden of proof is on the Company to prove actual redundancy on which the dismissal was grounded.
Case laws have suggested that the following are some vital considerations that an Industrial Court factors in when deciding if the retrenchment was bona fide:
Was there a reorganization by the Company?
Was the reorganization justified?
Did redundancy arise in the relevant departments that lead to the retrenchment of the claimant?
Whether the practice of retrenchment was done in accordance with the Code and standards of fair practice?
Was there adequate compensation given?
If the Court finds that the retrenchment was without just cause and excuse, the Court can award remedies such as back wages, reinstatement and/or compensation in lieu of reinstatement.
Could the Firm have offered Makcik Sia a salary cut instead?
The Firm could have offered to reduce Makcik Sia’s salary instead provided that she consents to this arrangement. In the case of Lim Ban Leong v Gold Bridge Engineering & Construction & Construction Bhd [2017] 2 LNS 0370 (ILR), the Industrial Court held as follows:
“Traditionally, any salary cut to an employee’s pay can be used as a ground by the employee to plead constructive dismissal. However, if the company is facing losses and is trying to fight off closure of its business or retrenchment of its employees, the company can appeal to the employees to ride through the rough times with it and take a salary cut which can then be reinstated and increased when the business picks up again This appears to have been done in this case with the First Salary Cut albeit without any express consent from the employees. The Court notes that there should have been much more engagement by the Respondent with its employees in order to maintain industrial harmony.“
Conclusion
As such, the Firm would have to prove to the Court that they have abided by all the necessary guidelines in the Code and have taken the positive steps as explained above prior to retrenching the Makcik Sia.
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