Legal Update 7 of 2011

Whether an employee's retrenchment is made bona fide.

CASE:

Puan Malathy A/P Ramasandaran v Phillips Malaysia Sdn Bhd; Industrial Court Case No: 26/4-1324/06

ISSUE:

Whether an employee's retrenchment is made bona fide.

BRIEF FACTS:

• The claimant (Malathy) was employed by Phillips Malaysia ("the company") as an accounts assistant on 1 June 2000. She was, however, terminated on 24 August 2002 on grounds of redundancy.

• Malathy did not agree with the decision of the company to retrench her because she was not the last person to be hired in that capacity. And following the 'Last In First Out' principle, her colleague Chong, being 'last in', should have been retrenched instead.

• She also claims that the company made no attempts to find her alternative employment and refused to train her to be able to do Chong's job.

• Based on the said contentions, she argued that her redundancy was not made bona fide.

• The company explained that due to the economic slowdown at the time, a corporate directive was issued to improve the company's position in terms of costs and efficiency.

• Pursuant to the directive, the company commenced a realignment in its finance operations resulting in some functions, including Malathy's, being reassigned to the company's Finance Shared Services Centre ("FSSC") in Thailand. Thus, Malathy was made redundant.

• Furthermore, the company claimed that it did apply 'Last In, First Out' principles because although Chong was also an accounts assistant and more junior than Malathy, she nonetheless carried out a different and more complex function.

• Furthermore, Malathy who only had SPM qualifications, would not have been able to do Chong's job which requires at least Accountancy qualifications.

DECISION: Claimant's claim dismissed.

• It is established that an employer is entitled to organize his business in a manner he considers best.

• However, the employer must exercise this right bona fide and with good faith without prejudicing the interests of an employee.

• The court finds that Malathy's job had indeed become redundant with the said functions being reassigned to the company's FSSC in Thailand.

• Furthermore, Malathy admitted in cross-examination that her only complaint is that the company did not train her to do Chong's job; she does not deny that her position is redundant.

• But since Malathy has no experience and does not possess the necessary qualifications and whereas Chong is a degree holder, the courts finds that it not possible to train Malathy to do Chong's tasks.

• The principle of 'Last In First Out' is only one of the criteria to be used by the employer in making his selection of employees for retrenchment.

• If he has valid reasons to depart from this principle, he is allowed to do so.