As it has been over 2 years since the pandemic began, we are now seeing more decisions from the Industrial Court about employees who were dismissed due to the COVID-19 situation. In Choong Wai Kit v Tropicana Shared Services Sdn Bhd [Award No. 244 of 2022, 14 February 2022], the Industrial Court examined whether the Company had done enough to prevent retrenchment, or if it had acted too hastily in dismissing its employee.

Brief Facts 

  • The Claimant joined the Company on 13 January 2020 and was the General Manager of the International Sales Department of the Company, which is part of the Company’s Marketing and Sales Department.
  • As General Manager of the International Sales Department, he was involved in the marketing and sales of properties to the international market. He organised potential buyers from outside Malaysia, and coordinated property agents outside of Malaysia to visit and view properties and sites in Malaysia.
  • Due to the pandemic, the Company shut down the International Sales Department of the Company as it was facing a worldwide shutdown of business and border-crossing and deterioration in overall economic activities in most countries.
  • The Claimant’s position was made redundant and he was dismissed on 19 April 2020. The Claimant claimed that he was unfairly dismissed.

Court’s Findings

The Court found that the Claimant was unfairly dismissed. The Court was not convinced that the Company had retrenched the Claimant as part of cost containment:

  • After termination and/or baiting a resignation from employees under the shut-down department, the Company appointed 3 new directors.
  • The Company was still profitable and revenue positive months after the Claimant’s dismissal.
  • The dismissal of the Claimant was done in April 2020, during Malaysia’s first movement control order (“MCO”) which started on 18 March 2020. The Claimant’s dismissal was done hastily given that the MCO had not even been in force for 1 complete month.
  • There was no proof that the Company tried to reduce its financial constraints before retrenching the Claimant. For example, there was no overall paycut for employees, which the Court viewed was “in a grander scale… a more effective way of cost-cutting and cost-saving”.
  • There was also no evidence that the Company attempted other means to avert retrenchment such as transferring the Claimant to other teams within the same department.
  • Further, a Senior General Manager of Marketing & Sales who resigned earlier on 4 April 2020, was later reappointed by the Company two months later for the same position. Following the reappointment of this Senior General Manager in less than two months from the Claimant’s dismissal, the Company still needed people to assist with local sales and marketing.
  • Whether it is local or international sales and marketing, there were obviously vacancies in the marketing and sales department of the Company in 2020. The Company had posted advertisements consistently throughout 2020 looking for employees.
  • There was no evidence why the Company shut down the International Sales Department, and the Company’s witness could not answer important questions about the selection process, the actual financial position of the Company and/or the job scope of the Claimant.

Key Takeaways

In its decision, the Court referred to Mohamad Shahrul bin Kahulan v Lourdes Medical Services Sdn Bhd [2021] 2 LNS 1295, where it was held that the mere reduction of revenue because of the MCO cannot be justification for retrenchment; since a Company’s revenue will fluctuate occasionally, it does not mean that the moment there is some reduction in revenue, the Company can quickly and immediately retrench its employees. There are other meaningful ways a Company can initiate financial austerity measures, so retrenchment of employees should not be the first step in cost cutting measures.

Although financial constraints arising from the pandemic can give rise to genuine redundancy, employers must still carry out retrenchment exercises with due process. It will not be acceptable to rush into a retrenchment at the first sign of financial trouble, since the Court will expect the Company to try alternative measures to prevent retrenchment, since this relates to whether the dismissal was reasonable and fair.

Here, the Court was not convinced that the redundancy was genuine, given that the dismissal took place within 3 weeks of the MCO and before any other alternatives were considered. This, coupled with the evidence that the Company was not really in financial constraints and was looking for new employees, resulted in the Company having to pay further compensation to its dismissed employee.

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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, 2021 and 2022, 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.

 

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