COVID-19 has had a devastating impact on jobs around the world. Almost every country has experienced an economic downturn, and as businesses struggle to steady the ship and stay afloat, many employers have been doing their best to retain their employees where possible. It has been a very busy 2020 for employment lawyers and HR professionals.
Unfortunately, for employers in many industries, COVID-19 has negatively affected their revenues too significantly, and cutting jobs has become the only solution to keep the businesses going. This has also been the case in Malaysia, where the Movement Control Order crippled many businesses, and the government has been unable to provide meaningful assistance to employers. For example, the aid provided under the Prihatin wage subsidy program is very low and short-term compared to other countries, and comes with conditions attached that make it impractical for many employers.
As a result, there have already been many retrenchments carried out in Malaysia, with even more to come. Indicative of the times, in the past couple of months, we have suddenly seen a significant amount of traffic on an old article I published here in January 2016 — “What you need to know about the law on retrenchment of employees”.
But retrenchments can be tricky. Over the years I’ve seen many employers make mistakes that result in unfair dismissal claims, a messy and costly court process, and sometimes very big court awards to be paid to former employees. Often, these mistakes are made even by employers who have done their research on the law, and sometimes even by those who have obtained legal advice (which ultimately turned out to be incomplete or flawed).
Knowing how to properly carry out a retrenchment exercise — and knowing what practical mistakes and missteps to avoid — comes with experience. It also helps greatly to analyse how other businesses have implemented retrenchments (both properly and improperly), and so in this article I set out very brief summaries of a selection of retrenchment-related decisions by the Industrial Court in the past year.
Under Malaysia’s movement control restrictions and with COVID-19, companies are facing cash-flow issues and financial difficulties. With the employers facing such difficulties, the employees may also face salary cuts (for example, see this news report) or retrenchment. Companies may then slip closer towards financial distress and may have to pursue restructuring and insolvency options. This article sets out the insolvency issues relating to employees.
I set out the different scenarios where a company in distress may pursue a scheme of arrangement, apply for judicial management, end up placed in receivership or is compulsorily wound up. I touch on how these scenarios will affect the rights of employees. Continue reading →
I’m delighted to share that the DLA Piper Guide to Going Global series has recently been updated.
This series includes the Employment practice area, and I provided the Malaysia content for this section.
The Employment guide has information on 56 jurisdictions. DLA Piper is one of the largest law firms in the world, but does not have a Malaysia office, and I am the sole Malaysian contributor in the series.
According to the Malaysian Employers’ Federation (MEF), more than 20,000 employees were retrenched in 2015 (as at September 2015). Comparatively, the figure for the entire 2014 was 10,000 employees. The MEF predicts that it will only get worse in 2016.
Although the steepest increase in retrenchment numbers are in the oil and gas industry, the banking industry has also seen several retrenchment exercises or voluntary separation schemes being implemented. The legal industry has also been affected, with many medium and big law firms either downsizing or freezing hiring.
Let’s take a quick look at the law related to retrenchments. As an employer, when can I retrench employees? Am I free to choose which employees to let go? How much do I have to pay them as severance? As an employee, what are my rights? Can I challenge a retrenchment?