LIFO

Case Update: Retrenchment deemed unfair due to flaws in selection process, lack of cost-cutting measures

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.

Retrenchments and redundancies have been a regular occurrence across the world in recent years, and Malaysia has not been exempted. In the past 6 months alone, we have seen employers across various industries implementing reductions-in-force or “right-sizing” exercises in two noticeable waves — one at the end of 2022, another one in the first quarter of 2023, and one more currently in the planning stage likely to be rolled out in April/May.

While the general legal position is that the Malaysian courts acknowledge an employer’s prerogative in organising its business in the manner it considers best, this prerogative must be exercised in good faith, and carried out with the proper process. As can be seen from the many retrenchment-related articles I have published, many employers still don’t get this right. Here are some of my previous articles on the subject:

The recent Industrial Court award in Collin Toh Mer Vin v Black & Decker Asia Pacific (Malaysia) Sdn Bhd (Award No. 578 of 2023) provides another example of potentially costly missteps when carrying out a retrenchment.

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Case Update: Justifying a retrenchment and departure from LIFO

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.

Malaysian courts recognise an employer’s right to organise his business in the way he thinks is best, provided that this right is exercised in good faith. The law gives an employer the right to decide on the number of employees his business employs based on business needs and efficiency. When it comes to retrenchments, the courts will be slow to intervene with an employer’s decision to retrench employees, unless there is evidence that the employer acted without proper reason, or otherwise acted in bad faith.

Employees who have been retrenched commonly challenge the legality of the termination on two points: (1) There was no genuine redundancy or other reason to carry out a retrenchment exercise. (2) Where there was a genuine need for a retrenchment, the selection criteria used by the employer in deciding which employees to dismiss was unfair.

Therefore, even though employers generally have the right to decide on their workforce numbers, any decision to retrench employees must be carefully considered and implemented. The recent Industrial Court award in Wong CP & 3 Others v. Taylor’s University Sdn Bhd (Award No. 342 of 2022) is worth considering as a reminder of the issues the Industrial Court will take into consideration where employees challenge the fairness of a retrenchment.

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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).

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