employment law

Case Update: Industrial Court finds retrenchment due to effects of COVID-19/MCO was unfair

Marcus van GeyzelLeave a comment

In this Case Update series, I share summaries of recent Malaysian court decisions to explore the current approach taken by the courts when deciding on employment-related issues. You can find all the posts in the series by clicking here, including case updates on other legal areas by TheMalaysianLawyer co-founder Lee Shih.

The Industrial Court recently decided that the retrenchment of an employee, which the employer said was due to the challenges caused by the COVID-19 pandemic, was an unfair dismissal. This decision shows that, while the courts will uphold genuine retrenchments as an option available to employers to ensure the financial viability and survival of their businesses, employers cannot simply cite the pandemic as an excuse to retrench employees without proper justification.

The award in Joseph Lim Chien Shiuh v. DTTLT Sdn Bhd (Award No. 1052 of 2021) dated 19 May 2021 should serve as a cautionary tale for employers. I expect we will see many more employees successfully challenging terminations carried out in 2020 and 2021 by businesses claiming to have been affected by the various lockdowns or Movement Control Orders (MCOs) and related restrictions.

Continue reading →

Case Update: Court of Appeal sets out key legal principles for retrenchments

Marcus van GeyzelLeave a comment

In this Case Update series, I share summaries of recent Malaysian court decisions to explore the current approach taken by the courts when deciding on employment-related issues. You can find all the posts in the series by clicking here, including case updates on other legal areas by TheMalaysianLawyer co-founder Lee Shih.

Retrenchment exercises have been a regular occurrence in the Malaysian industrial relations landscape for many years now. This looks set to continue deep into 2021, as employers respond to the challenges created by the on-going pandemic. Despite this prevalence, many employers often mishandle retrenchment exercises, with significant consequences.

The recent Court of Appeal (“the COA”) case of Ng Chang Seng v. Technip Geoproduction (M) Sdn Bhd & Anor [2021] 1 CLJ 365 usefully sets out some key legal and practical principles that all employers should consider when embarking on a retrenchment exercise. Among others, the judgment in the Ng Chang Seng case covered the following issues:

  1. What issues does the court consider when deciding whether the employer has proved a genuine redundancy?
  2. How can an employer justify not using Last-In First-Out (“LIFO”) for employee selection?
  3. Does an employer always have to retrench all foreign employees before retrenching Malaysian employees?
  4. Does the rehiring of some retrenched employees on a contract basis mean that there was no genuine redundancy?
  5. How much weight does the court give to non-compliance with the Code of Conduct for Industrial Harmony (“the Code of Conduct”)?

You can find all our previous posts on retrenchments by clicking on the tag here. Some of my earlier articles have been very popular and should prove useful:

  1. Retrenchments in Malaysia — some recent cases (29 May 2020).
  2. Case Update: Insufficient justification and improper handling of Voluntary Separation Scheme may give rise to unfair dismissal (20 March 2019).
  3. What you need to know about the law on retrenchment of employees (22 January 2016).

Continue reading →

Changes to the Industrial Relations Act from January 2021: Highlights and practical impact on employee exits

Marcus van GeyzelLeave a comment

Some important changes to Malaysia’s Industrial Relations Act came into force on 1 January 2021, pursuant to the Industrial Relations (Amendment) Act 2020 (“the Amendment Act”). The changes heavily affect unfair dismissal claims — from the pre-trial conciliation process through to appealing an Industrial Court decision — and may significantly impact employee terminations.

Continue reading →

Case Update: Unfair dismissal due to poor handling of mutual separation agreement

Marcus van Geyzel2 Comments

In this Case Update series, I share summaries of recent Malaysian court decisions to explore the current approach taken by the courts when deciding on employment-related issues. You can find all the posts in the series by clicking here, including case updates on other legal areas by TheMalaysianLawyer co-founder Lee Shih.

The COVID-19 pandemic has resulted in constant pressure on employers across almost all industries. There have been widespread measures to manage the financial fallout from the global effects of the pandemic, including salary reductions, employee redesignations, retrenchments, and separation schemes.

It has become a common practice for employers to use Mutual Separation Agreements (MSAs) — which also go by various other names such as “settlement agreements”, “separation agreements”, and “termination agreements” — to bypass or shortcut the usual termination processes. Many employers, as well as employees, view MSAs as a “cleaner” way of ending the employment relationship — instead of feeling like s/he has been “sacked”, the employee can be made to feel that the exit is on his/her terms, and employers prefer the certainty of clearly documented and mutually-agreed terms.

However, it is not uncommon for MSA exits to be improperly handled, resulting in a successful unfair/constructive dismissal claim by an employee, and a high financial cost to the employer. Some of my earlier articles would also be relevant for readers interested in this topic:

  1. Retrenchments in Malaysia — some recent cases (29 May 2020).
  2. Case Update: Insufficient justification and improper handling of Voluntary Separation Scheme may give rise to unfair dismissal (20 March 2019).
  3. Case Update: Can an employee bring an unfair dismissal claim after accepting a severance payment? (16 November 2017).
  4. What you need to know about the law on retrenchment of employees (22 January 2016).
  5. Handling employee dismissals properly under Malaysian law (13 January 2016).

In this article, we will review the Industrial Court case of Thanasegaran C Munusamy v. Vale Malaysia Minerals Sdn Bhd (Award No. 1647 of 2020), where the employee, Thanasegaran (the Employee) had signed an MSA, but then lodged an unfair dismissal claim against the employer, Vale Malaysia (the Company).

Continue reading →

Retrenchments in Malaysia — some recent cases

Marcus van Geyzel1 Comment

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.

Continue reading →

Company in Distress: Insolvency Issues relating to Employees

Lee ShihLeave a comment

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 →