2nd Annual Employment Law & Industrial Relations Conference – 27 & 28 March 2013

ELIRC2013

Both my partner and I will be speaking at the 2nd Annual Employment Law & Industrial Relations Conference organised by Solomon Wise and ExecBureau Consulting.

The Conference is going to to be held at Hotel Istana, Kuala Lumpur on 27 March 2013 (Wednesday) and to be followed with post-conference workshops on 28 March 2013 (Thursday).

I will be speaking on “Rightsizing, Redundancy and Retrenchment” at 11.15 a.m. on 27 March, while my partner, Cheng Leong will be speaking on “Internet Security, Privacy and Social Media Policies” at 6.00 p.m. on the same date.

Other distinguished speakers for the Conference are Jeremiah Gurusamy, Selvamalar, Janice Anne Leo, Gan Khong Aik, R. Ravindra Kumar, Trevor George De Silva and my personal good friends, Lily Yong and Alex Wong.

It is going to be an exciting Conference! For those are interested to attend the Conference, I would recommend that you register soon since there is an early-bird special price promotion for registration before 1 March 2013.

Brochure of the Conference can be downloaded HERE.

See you all there!

Case Update (Court of Appeal) – Can a Company Stops the Salary Increment of its Employee as a Form of Disciplinary Punishment?

For most employees, the most important part or highlight of their jobs usually takes place at the end of every month where they receive their monthly salary. The second most important part will be at the end of the year where they may receive annual bonus and/or salary increment. The third most important part for employees will be that rare occasion(s) when they are promoted in their job!

Now, what if one of the most important parts above is taken away by the company? Can a company do that and if a company does that, can an employee take a legal action against the company? Now, what if a company takes away those important part as a form of disciplinary punishment on an employee; can an employee walks away and claims that the company breaches the employment contract?

In a recent case between Rathimalar A/P Gnanasundram v RHB Bank Berhad & Anor (Civil Appeal No. W-01-89-2010), the Court of Appeal in its judgment dated 20 December 2012 has pondered upon this exact issue on stopping of salary increment as a form of disciplinary punishment.

In this case, a disciplinary proceedings had been conducted by the bank to inquire into some allegations of misconduct against the employee. The disciplinary proceedings were conducted for 2 days where the employee was accorded the right to defend herself by calling witnesses and to make submissions. At the end of the disciplinary proceedings, the bank found that the employee was guilty of some of the allegations of misconduct and decided to stop the employee’s salary increment as a form of punishment. There was no termination of employment involved.

Unhappy with the decision of the bank, the employee wrote 2 letters dated 13 October 2000 and 16 October 2000 to the bank where she had emphatically requested for the decision to stop her salary increment to be reversed because she considered such act to be a violation of her contract of employment and further stated that if the decision is not reversed, she would treat herself as constructively dismissed.

The employee then walked out of her employment and filed a representation under section 20 of the Industrial Relations Act 1967, claiming that she had been constructively dismissed by the bank. The employee’s representation was referred to the Industrial Court. However, the Industrial Court had decided to dismiss the employee’s claim of constructive dismissal. The employee then filed an application for judicial review at the High Court, to which the High Court agreed with the Award of the Industrial Court and dismissed the employee’s application. The Court of Appeal in its judgment dated 20 December 2012 had also decided that there is no merit in the employee’s appeal and had therefore dismissed the employee’s case. In doing so, the Court of Appeal stated as follows with regard to the punishment meted out –

We were unable to appreciate how a punishment imposed consequent to disciplinary proceedings conducted over two days wherein the appellant was accorded the right to defend herself by calling witnesses and to make submissions, and the 1st respondent’s refusal to accede to her demand that the disciplinary punishment be reversed, amounted to a breach of a fundamental term of the appellant’s contract of employment…

…This was a case of a disgruntled employee who claimed constructive dismissal when her employer refused to accede to her demand that the disciplinary punishment imposed upon her be reversed and she be exonerated from the charges of misconduct leveled against her.

In view of the above, it is clear that a company’s act of stopping the salary increment of its employee does not amount to a fundamental breach of employment contract if it is done as a form of disciplinary punishment. Hence, in situation like this, a company may take away an employee’s salary increment and there is no ground for the employee to claim for constructive dismissal.

A copy of the Court of Appeal judgment can be downloaded HERE.

A talk on Employment Law in Malaysia at Wisma KFC

Both my partner and I were invited as speakers at a seminar on “Business & Law: Inseparable Companions 3.0” organised by KFC Holdings (Malaysia) Bhd.

 

My partner, Foong Cheng Leong who specialises in Intellectual Property gave a talk on Personal Data Protection in Malaysia.

 

In the meantime, I, myself gave a talk on Employment Law in Malaysia. The PDF copy (with watermark) of my slide presentation on Employment Law in Malaysia can be downloaded HERE.

 

Dymphna giving a talk on “Employment Law in Malaysia” at Wisma KFC

Sales of Company’s Assets and Business: What Happen if the Buyer Offers Continuous Employment to the Employees?

In a situation where one company sells its assets and business to another company, often the questions that will subsequently follow will be along these lines – What about the employees? What should we do with the exisiting workforce? Some companies that buy over the assets and business of another companies might decide to offer continuous employment to the existing employees in the companies whose assets and business are being bought over. Generally, this depends on individual arrangements and agreements between the companies involved.

Now, what happen if the new company offers continuous employment and an employee accepts the offer? Will the employee’s years of service in the older company (previous employer) be taken into account or will the years of service start from zero (0) again with the new company? Will this affect computation of monetary benefits that the employee might be entitled to in the future with the new employer?

In a recent judgment of the Federal Court dated 15 August 2012, between Dynacraft Industries Sdn Bhd v Kamaruddin Bin Kana Mohd Shariff & 6 Ors, the same questions were contemplated. In this case, the assets and business of Dynacraft Sdn Bhd (DSB) were sold to Malaysia Pacific Industries Berhad (MPI) but transferred to its subsidiary, Dynacraft Industries Sdn Bhd (DISB).

Employees of DSB ceased their employment with DSB on 19.1.1996. On the same day, DISB made offers of continuous employment to all employees of DSB. Some of them accepted the offer, including the 7 employees in this case. So, they continued to work with DISB.

However, because of the worldwide economic downturn in 1998, DISB was facing financial difficulties and had to undergo reorganisation and rationalisation exercise. This resulted in a number of positions becoming redundant. The 7 employees who used to work under DSB and had then accepted the offer of continuous employment with DISB were among the employees considered redundant. They were subsequently retrenched from their employment with DISB.

In the retrenchment process, DISB did not take into account the years of service the 7 employees spent with their old employer. The 7 employees filed a claim for reinstatement under section 20 of the Industrial Relations Act 1967.

The Industrial Court decided in favour of the 7 employees and ruled that DISB did not follow the LIFO (Last in First Out) principle. Among others, the Industrial Court states as follows:

The fact remains, as stated earlier, that the company took over an ongoing business with its infrastructure, and workforce already in place. In these circumstances the LIFO rule demands that the claimants’ years with Dynacraft Sdn Bhd be taken into account.

The Federal Court agrees with the decision of the Industrial Court. Besides that, the Federal Court also note that there is nothing in the letters or any documents to qualify or limit the extent of the offer of continuous employment made by the new employer (DISB). There was nothing to say or even hint that the offer was limited only for the purpose of computing benefits and entitlement such as leave entitlement. The offer was clear, unequivocal and unmistakeable. It literally means what it says – that the employees were offered continued employment with the new employer and that the period of their employment with the old employer shall be deemed to be continous employment with the new employer. In these circumstances, the period of service of those employees with the old employer (albeit an entirely separate legal entity) should be taken into account either in computation of monetary benefits that the employees are entitled to pursuant to the retrenchment of their employment with the new employer or in the selection process for retrenchment under the LIFO principle.

However, it is important to note that the position of law above only applies to matters with similar facts and circumstances. For others, it may vary depending on other circumstances affecting the matter. That is why it is important to obtain legal advice before making any decisions that may have adverse effects on companies and/or individuals.

Before I end this article, here are some scenarios that may affect the positions of law abovementioned:

  1. What if retrenchment benefits have been paid to an employee before that employee accepts the offer for continuous employment with the new employer?
  2. What if there was a brief period of absence; i.e. the employee worked elsewhere for a couple of months before joining the new employer. Will that affect the term of ‘continous employment’?
  3. What if the new employer made the offer of continuous employment with certain limitations and the employee accepts the offer with those limitations?

I may deal with the scenarios above in my next article. In any event, feel free to leave any comments or to make any enquiries! Enjoy!

The Federal Court case mentioned in this article can be downloaded HERE.

Latest Case Updates from the Federal Court – VSS

Question: Can an employee who on his own will, accepts the benefits of VSS, resigns, signs a full and final settlement and walks away with benefits under the VSS, turns around and ask for other benefits?

Zainon Binti Ahmad and 690 others v Padiberas Nasional Berhad

[In the Federal Court of Malaysia (Appellate Jurisdiction) Civil Appeal No: 02( )-44-2011(B)]

Date of Judgment: 16 July 2012

Coram:

  • Raus Sharif, PCA
  • Zulkefli Ahmad Makinudin, CJ (Malaya)
  • Richard Malanjun, CJ (Sabah & Sarawak)
  • Abdull Hamid Embong, FCJ
  • Suriyadi Halim Omar, FCJ

Brief Facts:

On 12.9.2003, the Company had invited its employees to apply for Voluntary Separation Scheme (VSS). This VSS was part of the Company’s restructuring scheme then. The Appellants responded to the Company’s invitation and applied for the VSS. Upon the Appellant’s successful application for the VSS, the Appellants ceased employment with the Company and the Company had duly paid all benefits due under the VSS to the Appellants.

Nearly 2 years after that, the Appellants issued a letter dated 12.12.2005 asking for ‘retirement’ benefits to be paid in accordance to the Company’s Handbook. The Company did not agree to that.

Main Issue:

Whether the rights that arise upon the termination of an employment contract are extinguished pursuant to a termination through VSS despite the absence of an express provision to that effect.

Findings of the Federal Court:

The Federal Court applied the decision of the Supreme Court of India, AK Bindal & Anor v Union of India & Anor [2003] 2 LRI 837 where the governing principles for VSS had been succinctly set out; i.e. –

The Voluntary Retirement Scheme (VRS) which sometimes called Voluntary Separation Scheme (VSS) is introduced by companies and industrial establishments in order to reduce the surplus staff and to bring in financial efficiency…

The whole idea of implementing VRS is to save costs and improve our productivity. The main purpose of paying this amount is to bring about a complete cessation of the jural relationship between the employer and the employee. After the amount is paid and the employee ceases to be under the employment of the company or the undertaking, he leaves with all his rights and there is no question of his again agitating for any kind of his past rights, with his erstwhile employer including making any claim with regard to enhancement of pay scale for an earlier period…

If the employee is still permitted to raise a grievance regarding enhancement of pay scale from a retrospective date, even after he had opted for a Voluntary Retirement Scheme and had accepted the amount paid to him, the whole purpose of introducing the scheme would be totally frustrated.

Besides agreeing with the principles above, the Federal Court also stated that the VSS scheme is a separate and independent contract intended to mutually override and terminate and existing contract of employment. Hence, although it was not expressly stated that the VSS would extinguish the rights and obligations under the contract of employment upon mutual termination, the rescission resulted in the extinguishment of rights under the former contract of employment.

Therefore, an employee who on his own will, accepts the benefits of VSS, resigns, signs a full and final settlement and walks away with benefits under the VSS, CANNOT then turn around and ask for any other benefits.

To download the full judgment of the Federal Court on this case, you may click HERE.

Latest Case Updates from the Industrial Court

Azizah Bin Abd Ghani v Bumiputra-Commerce Bank Berhad (Award No. 980 of 2012) dated 18 July 2012

Brief Facts:

  • The Claimant was the Head of Customer Service, Jalan Hang Tuah Branch since 3.9.2001.
  • On 29.8.2003, the Claimant was transferred to Masjid Tanah Branch as the Head of Customer Service.
  • On 1.4.2005, the Claimant was transferred to Jalan Munshi Abdullah Bracnh.
  • On 27.7.2005, the Bank issued a letter containing 4 allegations of misconduct against the Claimant.
  • The Claimant attended Domestic Inquiry on 11.8.2005 and was found guilty.
  • On 26.9.2005, the Claimant’s employment was terminated with immediate effect.
  • Through a letter dated 10.10.2005, the Claimant wrote a letter of appeal to the Bank. The Bank rejected the Claimant’s appeal and affirmed its decision to terminate the Claimant’s employment.

Findings by the Industrial Court:

  • The Claimant’s solicitor did not challenge the validity and finding made by the panel of the Domestic Inquiry. In fact, all allegations had been admitted in the Claimant’s written submission; i.e. that the Claimant did not follow the proper procedures.
  • It is trite law that if a Domestic Inquiry had been properly conducted, the Industrial Court may take into account evidence and findings of the investigation panel as a prima facie case against the Claimant. The case of Metroplex Administration Sdn Bhd v Mohamad Elias [1998] 5 CLJ 471 was referred to.
  • As a bank officer, especially one with long service, the Claimant ought to be more careful in conducting his duties and not to blindly follow the instruction of CSM (Customer Service Manager). Moreover, the Claimant had been provided with a checklist of duties and was informed of the proper procedures that ought to be followed.
  • Failure of the Claimant to follow proper procedure was not only a neglect of duties but also a serious misconduct. Excerpt at page 357 of B R Ghaiye, Misconduct in Employment (in Public and Private sector) was referred to.
  • Banking industries require employees who are high in disciplined and honesty. The cases of Perwira Habib Bank (M) Bhd v Tan Teng Seng @ Lim Teng Ho [1997] 2 ILR 839 and Hong Kong Bank Malaysia Bhd v Jaafar Ahmad Thani [2007] 4 ILR 601 were referred to.
  • In view of the above, the Industrial Court decided that the Bank had just cause or excuse to terminate the Claimant’s employment. The Claimant’s claim was therefore dismissed.
  • Although the Court pitied the Claimant, the Court did not want to interfere with the sanction imposed by the Bank since the Bank had already given a chance for the Claimant to appeal and the Claimant’s misconduct had caused big loss to the Bank.

 

Encik Mohd Tahir Bin Abdull Kudus v Radius International Kuala Lumpur (Award No. 981 of 2012) dated 18 July 2012

Brief Facts:

  • The Claimant commenced employment with the Company on 18.1.2005 as a Technical Officer. He was placed on probation.
  • By a letter dated 19.7.2005, the Company terminated the Claimant’s services on even date on the alleged ground that his level of performance and job attitude during his probationary period continued to fall below expectation.

Findings by the Industrial Court:

  • The Claimant had not shown any improvement in his job performance during his probationary period despite being warned several times.
  • The Claimant did not receive any letter of confirmation so he was not a confirmed employee.
  • Pursuant to the Employee Handbook, the Claimant was notified not later than the 10th day of his extended probationary period that he was not confirmed in his position.
  • The Company has proven on balance of probabilities that the Claimant was not suitable to be confirmed in his job and accordingly the Company’s termination of his service as a probationer was with just cause or excuse. The Court upheld the dismissal of the Claimant as a probationer.

Latest Case Updates from the Industrial Court

Encik Yahaya Bin Talib v Southern Bank Berhad (Award No. 960 of 2012) dated 12 July 2012

Brief Facts:

  • The Claimant worked for the Bank for 31 years. His last posting was as the Bank’s Account Manager/Vice President.
  • The Claimant’s claim that he was dismissed without just cause or excuse.
  • The High Court, in an application for judicial review by the Claimant, found favour in the Claimant’s case and had directed for remedy to be assessed by the Industrial Court.
  • The Industrial Relations Act 1967 does not prescribe what principles to be applied by the Court in granting of a remedy to a workman held to have been dismissed with just cause or excuse. For that matter, the Act is silent even on the authority of the Court to make an Award of monetary compensation. The Industrial Court is left to formulate principles on their own accord [see page 7 of the Award].

Remedy:

  • Compensation in lieu of reinstatement =  RM6,900 x  31 months = RM213,900.00
  • Backwages = RM6,900 x 24 months = RM165,600.00
  • The backwages was then scaled down by 40% (because of gainful employment and contributory conduct), thus giving the balance of RM99,360.00
  • The Bank was thus ordered to pay the total sum of RM313,260.00.