redundancy

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

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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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Newly Updated: “Guide to Malaysian Employment Law”

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We have just updated our very popular Guide to Malaysian Employment Law. These updates take into account the significant changes to the Employment Act as a result of the Employment (Amendment) Act 2022 and Employment (Amendment of First Schedule) Order 2022 which came into force on 1 January 2023.

Since the Guide was launched in October 2021 (See: “Just launched: ‘Guide to Malaysian Employment Law'”) it has attracted a constant stream of readers, still averaging in the high thousands of unique views every month.

As mentioned when the Guide was launched, the topics in the Guide have been selected based on feedback from in-house counsel and HR professionals, and cover the usual high-level background legal information they would like to have on-hand, particularly as professionals from other jurisdictions considering employment issues in Malaysia. The feedback we have received on the Guide has been overwhelmingly positive, and we believe it is a unique resource.

We hope the updated Guide will continue to prove useful to all readers. (Guide to Malaysian Employment Law)

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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Just launched: “Guide to Malaysian Employment Law”

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I have always believed that by writing about the law and related topics, I am not only sharing knowledge with others, but also richly expanding and deepening my own understanding of the topics I write about. This is why I have been consistently publishing my legal writings from my early days of practice, going back 18 years now.

Today, we have launched a Guide to Malaysian Employment Law. This Guide will be hosted on a standalone page on The Malaysian Lawyer, and is a one-stop introductory guide to Malaysian employment law, including categorised links to employment law articles I have published on The Malaysian Lawyer.

The topics in the Guide have been selected based on feedback from in-house counsel and HR professionals, and cover the usual high-level background legal information they would like to have on-hand, particularly as professionals from other jurisdictions considering employment issues in Malaysia.

The Guide will be constantly-evolving, and its contents will be updated from time-to-time. Please share the Guide with others who may find it useful, and leave a comment if you have any feedback, or requests or suggestions for other employment law issues that should be covered.

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Case Update: Another company’s retrenchment of employees due to COVID-19/MCO deemed unfair by Industrial Court

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.

There was a very sharp rise in retrenchment numbers in Malaysia in 2020, particularly in the aftermath of the first Movement Control Order (MCO), which started in March 2020. We are now seeing Industrial Court decisions as a result of unfair dismissal complaints lodged by employees who had their employment terminated in the first half of 2020, and I expect we will continue to see a steady succession of these decisions in the coming months.

As I have often explained, while employers are legally entitled to dismiss employees where the retrenchment is for genuine reasons, employers must be able to show that the termination was not improperly motivated. I recently highlighted one case where the Industrial Court 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: “Case Update: Industrial Court finds retrenchment due to effects of COVID-19/MCO was unfair”.

In this article, I summarise four recent awards involving retrenchments carried out at the same time by the same employer, which the employer said was due to the effects of the MCO and pandemic:

  1. Mohamad Sahrul Bin Kahulan v. Lourdes Medical Services Sdn Bhd (Award No. 1295 of 2021).
  2. Gawri A/P Muthadakan v. Lourdes Medical Services Sdn Bhd (Award No. 1296 of 2021).
  3. Lalitha A/P Subramaniam v. Lourdes Medical Services Sdn Bhd (Award No. 1297 of 2021).
  4. Rasalechumi A/P Kanagaratnam v. Lourdes Medical Services Sdn Bhd (Award No. 1298 of 2021).
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Employee poor performance: Some recent cases

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The proper management of under-performing employees is always a tricky proposition. While the law recognises poor performance as one of the reasons that would constitute “just cause” for dismissing an employee, many employers make mistakes which result in dismissed employees winning unfair dismissal claims. There have also been instances where employees have been able to walk out and claim that they have been constructively dismissed due to the employer putting them on a performance improvement plan (“PIP”).

There are many variables that will determine whether a poor performance termination was carried out fairly. It’s always useful for employers and decision-makers to review how other employers have managed under-performing employees. In this article, I briefly summarise the following recent cases related to PIPs and poor performance dismissals:

  1. Azura Norden v. Small Medium Enterprise Development Bank Malaysia Berhad (Award No. 94 of 2021).
  2. Charles Selvam Andrew Francis v. Kebabangan Petroleum Operating Company Sdn Bhd (Award No. 256 of 2021).
  3. Thomas Kuruvilla v. Malaysia Digital Economy Corporation Sdn Bhd (Award No. 151 of 2021).

These summaries will provide valuable insights on the issues the Industrial Court considers when assessing performance-related terminations.

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