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.