When the pandemic first hit in early 2020, the job market was hit: employers with a conservative outlook were looking to cost-cutting and retrenchment due to the uncertain economy. Some employers reconsidered new hires and retracted job offers. Do candidates have any recourse if their job offers are retracted? The recent Industrial Court decision in Mohammad Ulfa bin Usamah v Allegis Group Malaysia Sdn Bhd (Award No. 784 of 2021, 19 April 2021) considered this issue.
- The Claimant was offered a position as a Recruitment Relationship Manager through a letter of offer dated 16 March 2020. Under his letter of offer, he was supposed to commence work on 20 April 2020.
- In March 2020, the pandemic hit and Malaysia was subject to the Movement Control Order.
- Due to the above, the Claimant and the Company agreed to delay his commencement date to 4 May 2020.
- However, on 24 April 2020, the Claimant received a call from the Company they would be retracting the offer of employment due to the economy downturn caused by COVID-19. The Company issued a formal letter dated 27 April 2020 to rescind the letter of offer dated 16 March 2020.
- The Claimant earlier resigned from his previous employment in anticipation of joining the Company. He therefore filed a claim of unfair dismissal under Section 20 of the Industrial Relations Act 1967.
The Industrial Court dismissed the Claimant’s claim of unfair dismissal:
- The Claimant had not commenced employment with the Company. His commencement date was 4 May 2020 but the Company rescinded the offer on 27 April 2020.
- For the Claimant to bring a claim of unfair dismissal under Section 20 of the Industrial Relations Act 1967, the Claimant must be a “workman”. If the Claimant had not yet commenced employment, he is not a “workman”.
- The Industrial Court referred to earlier decisions in Borneo Pulp & Paper Sdn Bhd v Raja Chellaiah  3 ILR 1227 and Elizabeth Voo Sook Ling v Kuala Lumpur City Securities Sdn Bhd  2 ILR 570 which held that if the termination or rescission of the contract of employment took place before the stated date of commencement of employment, the employee will have no right of recourse under Section 20 of the Industrial Relations Act.
- The Industrial Court has no jurisdiction to decide or determine the Claimant’s claim.
The Industrial Court’s decision is not something new, as it has long been established that the retraction of a job offer is not an unfair dismissal. This is because a dismissal can only occur once an employee starts employment. While this is not new law, it is relevant in our current economy as some employers may be reconsidering their headcount additions.
This does not mean that candidates have no recourse if their job offers are withdrawn at the last minute. The Industrial Court observed that it is possible for the Claimant to bring the matter before the civil courts if the Company breached the contract.
Therefore, a candidate who has incurred costs in reliance on the job offer, and has suffered damage due to a Company’s breach of contract, can consider a civil claim against the Company. In the civil court, the candidate’s claim will be founded on breach of contract, so the candidate must be able to show how the Company breached the contract in retracting the offer and prove the direct damage suffered. For example, there is no breach if the employer retracts the offer before the candidate accepts it.
Employers in the difficult position of having to retract job offers for commercial reasons should handle the situation with empathy, given that a candidate may have acted to their detriment in expectation of this new job. While there is no legal liability in terms of unfair dismissal, the risk of a civil suit still exists.
This article was written by Donovan Cheah. Donovan has been named as a Recommended Lawyer for Labour and Employment by the Legal 500 Asia Pacific 2017, 2018, 2019, 2020 and 2021, and he has also been recognised by Chambers Asia Pacific and Asialaw Profiles for his employment law and industrial relations work.
Donovan & Ho is a law firm in Malaysia. Our practice areas include employment law, dispute resolution, tax advisory and corporate advisory. Have a question? Please contact us.