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Termination: Court Awards and Workers’ Rights
- Prof.V.Anantaraman
I
INTRODUCTION
In Industrial Law, termination really refers to the termination of the worker’s contract of employment for any reason. When the employment contract is terminated by the employer because of the perceived misconduct or negative conduct of the workman, it is termed dismissal. When termination of the contract of employment of an employees or employee is due to redundancy or reorganization, it is known as retrenchment. On the other hand, when the employer terminates the employment contract of an employee on some pretext other than the real reason like lawful trade union activity, it is called victimization.
Under the Malaysian Industrial Law, termination due to any reason, including dismissal during the pendancy of recognition proceedings or closure of a business, is brought under the meaning of dismissal and as such all complaints of unjust dismissals are lodged under section 20 of the Industrial Relations Act 1967 . On the Other hand, if a union sponsors a retrenchment dispute, it is lodged under S 26(1) of the Act. The Industrial Court in citing the Federal Court’s ruling allowing this treatment of all types of termination as dismissals stated that
“It is a well established principle of law that there is no material difference between termination of employment and a dismissal. The term employed in the act of bringing a workman’s employment to an end is inconsequential; it is the court’s duty to determine whether the act, whatever the label attached to it, was for a just cause or excuse”
Reterenchment and ILO Standards
In the domain of termination rights of workers provisions under the International Labour Could very well serve as useful bench marks for purpose of any comparison or evaluation of any National Industrial Relations Law and its practice. Termination under the International Labour Standards is currently governed by Convention No.158 of 1982 and recommendations NO.166 of 1982 as well. These instruments are deliberately designed to strike a balance between the interests of workers and the enterprise.
The Substantive provisions of the convention and recommendations are divided into standards of general application and supplementary provisions concerning termination of employment for economic, technological, structural or similar reasons.
Under the standards of General application, the basic principle justifying termination is stated as under: "The employment of an employee is not to be terminated unless there is a valid reason connected with his capacity or conduct or based on the operational requirements of the enterprise."
Specifically it is stipulated that termination for legitimate trade union activities is not a valid reason. Dismissal for misconduct or poor performance is a valid reason provided a procedure is followed; and provision should be there for the worker to appeal against unjust termination. Procedure for conciliation and adjudication could be accommodated under such a procedure of appeal against unjust termination. Finally, proven unjust termination calls for the remedy of reinstatement or payment of compensation when reinstatement is not found feasible by the appellate authority.
Among the supplementary provisions governing retrenchment, the International Labour Standards enjoin on all parties concerned that they should seek to avert or minimize as far as possible termination of employment for reasons of an economic, technological, structural or similar nature, without prejudice to the efficient operation of the enterprise, and to mitigate adverse effects of termination of employment for these reasons on the workers concerned:
a. Since the need for retrenchment for the aforementioned reasons can be foreseen by the employee, the recommendations call for prior information to workers and consultation with union to find ways and means to mitigate the adverse effects of retrenchment of workers.
b. The questions on which consultation should take place might include measures to avoid the reduction of the work force, restriction on the overtime, training and retraining, spreading termination of employment over a certain period of time, measures for minimizing the effects of the reduction on the workers concerned, and the selection of workers to be affected by the reduction.
c. The selection of the workers to be affected by reduction of the work force should be made according to precise criteria established in advance in consultation with the union. These may include, on the one hand relative skill, ability, experience and occupational qualifications of individual employees coupled with the needs of the enterprise for its continued efficiency, and on the other hand, highly objective factors such as length of service, age and family situation
d. Finally, workers whose employment has been terminated due to contraction of the work force should be given priority in re engagement by their employers.
The Role of the Industrial Court
In Malaysia, under the section 13(3) of the Industrial Relations Act 1967, retrenchment due to redundancy or reorganization is the prerogative of the management.
However, when it is alleged that redundancy is not real and the termination was capricious or without reason or was malafide or activated by victimization or unfair labour practice, the industrial court is empowered to declare the retrenchment exercise unjustified and order by way of remedy reinstatement or payment of compensation in lieu.
When a dismissal has been referred to the industrial court and the employer contends that the dismissal is the result of redundancy, the very first step is for the employer to satisfy the court that redundancy was the real reason for the retrenchment.
Following the Federal Courts ruling in Goon Kwee Phoy’s case the industrial court in Food Specialties Case stated.
'It is an established principle of law that when an employer relies on redundancy as the reason for dismissal and the court has found as a fact that it had not been proved, then the court would need to go no further as the inevitable conclusion must be that the termination or dismissal was without just cause or excuse”.
Even after establishing that redundancy was real, the industrial court should examine whether the employer, in selecting employees to be retrenched has followed the “last in, first out” principle; furthermore, the court may also be guided by the code of conduct for industrial harmony in arriving at decisions in retrenchment disputes. It is to be noted that the code guidelines on retrenchment closely correspond to the international labour standards. The attitude of the Industrial Court in taking into account the code guidelines in making their decision has been well articulated by the Chairman of the Industrial court in Behn Meyer’s case thus:
“I am mindful the code of conduct for industrial harmony is not a piece of legislation with legal binding. Neverthless it is an agreed document with endorsement by both the employers and the employees to observe and comply with its provisions to protect their separate interests. The industrial court had, in various past awards, given recognition to the philosophy of the code by seeking assistance from its provisions in adjudicating disputes before it.”
Despite such a lofty avowal, the record of industrial courts’ performance in taking into account the code guidelines in determining retrenchment is rather dismal. It is well-known that until the code was given “teeth” in 1980 by the introduction of S30 (5A) to the Industrial Relations Act 1967, it was just a piece of paper with salutary recommendations to both employers, their trade unions and trade union of employees. Lobo is quite caustic in his criticism of the court’s attitude toward the code despite S 30(5A) of the Act which stipulated that the Industrial Court may take into account the code guidelines in making its award. Furthermore, the High Court in 1989 had not only emphasized the discretionary nature of sub section30 (5A) but the permissive nature of the entire code as well.
The role of the Industrial Court in dealing with retrenchment disputes refered to the court has been explained in earlier articles written by Cyrus Das, Chandra Segaran and Rozanah Ab Rahman However, the purpose of the present article is to evaluate critically the performance of the industrial court not only in terms of the criteria used but also how they have been applied to determine retrenchment disputes referred to it. It is needless to say that since it is a sort of bouquets and brickbats type of analysis, compliments and criticisms would be intermixed in this review. Incidently, though this review is not based on any random sample of court decisions on retrenchment over any specific period of time, the cases selected for consideration range from 1986 to 2001. It is fervently hoped that this analysis would serve as a gentle reminder to all concerned of the falliability of the human decision making process, especially when the workmen’s right to livelihood is threatened.
II
Retrenchment : Basic Grounds
It is a well established principle that the right of the employer to reorganize his business must be limited by the rule that the he must act bonafide. The employer will be acting mala fide if he undertakes retrenchment not for any genuine reason of redundancy but for some ulterior purposes. For example, retrenchment becomes a colourable exercise when it is done for the collateral purpose of getting rid of an employee or if the employee is retrenched when there is no dimution or cessation of demand for the kind of work he was engaged. Of course retrenchment undertaken with a view to victimizing workers is an abnoxious unfair labour practice. The following cases illustrate that our industrial courts had not condoned the employers when they acted mala-fide under any of these grounds.
1. The Aluminium Company of Malaysia faced with declining business and continued losses, retrenched over 300 out of its 802 employees between 1985 and 1987 on the grounds of restructuring the organization, amalgamation, rationalization and relocation of functions. In the wake of such massive downsizing, it is indeed remarkable that the industrial court sprang to the defense of Mustapha who was also retrenched on the grounds of redundancy after his 23 years of faithful service to the company.
In this case, the Works Manager created two senior posts of supervisors and promoted two of Mustapha’s juniors to these senior posts, and asked them to take over Mustapha’s job, and terminated the service of Mustapha.
The Industrial Court had no hesitation in coming to the conclusion that the retrenchment was done for the collateral purpose of getting rid of Mustapha. His termination, in fact, did not conform to the principle of LIFO and selecting him for retrenchment amounted to an unfair labour practice.
2. The employer in the Food Specialties Case retrenched 32 workmen in December 1985 on the ground of redundancy due to general trade recession. Claiming the same ground the employer retrenched the claimant also in October 1986 nearly ten months later, when the particular kind of work done by the claimant did not cease or become diminished in the company requirement. It is heartening to note that the industrial court found on the balance of probabilities that the decision of the employer was a colourable exercise to get rid of the claimant.
3. In the case of Tropical Inn Sdn Bhd. the industrial court exposed the misdemanour of the employer in no uncertain terms. Specifically, the Hotel closed the carpentry service in the house-keeping department of the hotel and retrenched both the employees of this unit on the ground of redundancy. The exercise was aimed at getting rid of the second claimant who was the Chairman of the in-house Union Committee and the first claimant also became a victim in the process.
The court held that the so called “closing down of the carpentry service” was in fact a colourable exercise by the hotel and it was more an anti-union act than one arising out of a real necessity to retrench.
The industrial court in this case was not only alert to the employer's act of victimization of a union activitist but to his unscrupulous conduct in dismissing an innocent employee who in no way incurred the displeasure of the employer except that he stood in the way of getting rid of his colleague.
4. In William Jacks Co case the industrial court established that the employer was acting mala fide in retrenching Balasingam. Balasingam was an active unionist sent to Australia to attend a trade union course which was sanctioned by the National Union of Commercial Workers. He was a Bill Collector and claimed that he was victimized on the pretext that his function as a bill collector diminished or ceased to exist and therefore he was surplus to the bill collection department , so as to make him redundant.
On the totality of evidence, the industrial court came to the conclusion that there was in fact no redundancy situation in the company and there was clear evidence that the function of bill collection continued and was performed by a credit control executive together with another who was employed as a credit supervisor who also did bill collection. The retrenchment of Balasingam was declared as an exercise in bad faith, an unfair labour practice and victimization. It is to be noted that the Court of Appeal upheld the decision of the industrial court.
5. In upholding the decision of the industrial court that the retrenchment of the claimant was unjustified, the Court of Appeal in Bayer (M) Bhd case made it very clear that “it is our view that merely to show evidence of reorganization in the appellant is certainly not sufficient. There was evidence before the court that although sales were reduced, the work load of the respondent remained the same. After his dismissal, his workload was taken over by two of his former colleagues. Faced with these evidence, is it any wonder that the court made a finding of fact that there was no convincing evidence produced by the appellant to such an extent that he was considered redundant.
6. Finally, the Industrial Court in David Distribution case citing the Court of Appeal ruling in Bayer case aforementioned observed that it would appear that the Court of Appeal in the above case held that there was no redundancy when a workman’s work load was taken over by two of his former colleagues after his dismissal. Stating that “the exact situation is in fact has occurred in the instant case, the industrial court held the retrenchment of the claimant was unjustified. Specifically, the court stated that the fact that the claimant’s functions had been taken over by two of his colleagues in the same division indicated that his post was not abolished.”
III
RETRENCHMENT: ADHERANCE TO LIFO PRINCIPLE
To quote Cyrus Das, LIFO (Last in First Out) is the Golden Rule of procedural retrenchment law. It is a firmly entrenched principle . In other words “a justifiable” retrenchment exercise could nevertheless be struck down because the selection of employees for retrenchment was not in accordance with LIFO procedure.
1. The Industrial Court in Advanced Micro Devices case stated that
“It is a well established and accepted practice of industrial law that in effecting retrenchment, an employer should comply with the industrial principle of “Last in First out” unless there are sound and valid reasons for departure”.
In any analysis of the Industrial Court cases on retrenchment, it would become apparent that the allegation would invariably be that the employer had not followed the LIFO procedure in selecting employees for retrenchment. The fact that the LIFO principle may be departed from gives rise to complaints of abuse of the procedure by the employer, and their subsequent justification, in some cases, by the industrial court could give rise to questions of fairness of its awards.
This is because; the attitude of the court in evaluating the application of the LIFO principle by the employer may seem to depend on the predilections of its presiding officers. In a lighter vein one may even say that the way the court prefaces its arguments in examining this issue could even predict whether it is going to defend the prerogative of the management to retrench or the right of the workman to his livelihood.
The following two statements by the industrial courts on the application and burden cast on the employer to justify departure from LIFO principle in selecting employees for retrenchment is quite predictive of the final decision. In Mamut Copper Mining case, the Chairman of the industrial court observed.
“The court agrees with the submission of learned Counsel for the company on the non-rigidity of the LIFO principle. Besides the LIFO principle, the criteria set out in art 22 (b) (of the Code) which an employer is enjoined to take into account includes inter alia, the employer’s interest in efficiency of its operations and the exigencies confronting the employer. Such considerations might place the employer in the position where its requirement for a particular individual employee’s ability, experience, skills and qualifications might have to supersede another more senior employee’s legitimate expectation to be retained in the employer’s service. The Court must, however, state that while the LIFO principle might for good reasons have to give way to some other principle in the selection process, art 22(b) of the Agreed Practices to the Code emphasizes the necessity for the adoption and application of objective criteria in the said procedure. These criteria ought to be worked out in advance in consultation with the relevant trade union or employees’ representatives.
The specification of the need to apply an objective criteria for selection is a disavowal of subjectivity in the selection process. Selection of employees for retrenchment by management based on the latter’s subjective views of an employee is fraught with the dangers of artbitrariness, victimization and unfair labor practice which are wholly unacceptable in good industrial relations practice.
The Court must also go on further to reiterate that in line with the objective criteria principle, the onus of justifying a departure from the LIFO principle for sound and valid reason is cast upon the employer….. The employer discharges the onus of justifying his departure from the LIFO principle by adducing substantive and reliable evidence of the grounds or reasons justifying a departure from the LIFO principle.
The second statement justifying the departure from the LIFO procedure is that of the Chairman of the Industrial Court in Supreme Corporation case
It must be noted, however, that LIFO is not a mandatory rule (it is not a statutory provision) which cannot be departed from by the employer when retrenching staff. That the employer is not denied the freedom to depart from the LIFO procedure is made obvious by the clause 22(b) of the Code of Conduct for Industrial Harmony.
In paragraph 22(b) of the Code of Conduct, it is stated that “the employer should select employees to be retrenched in accordance with objective criteria; such criteria which would have been worked out in advance with the employee representatives or trade union as appropriate may include ability, experience, skill and occupational qualifications besides his length of service, his age and his family situation.”
The industrial court seems to argue that so long as the selection of employees for retrenchment is on the basis of objective criteria as perceived by the employer and acquiesced by the court, any violation of the LIFO principle, it may incidently entail, is justifiable in the interest of the efficiency of the enterprise. In other words, selection of employees to be retrenched on the basis of such objective criteria may acceptably result in some seniors being retrenched in preference to their juniors who according these criteria are retained.
1. Malaysian Shipyard and Engineering Company case vividly illustrates this kind situation. In this case, the selection of employees to be retrenched was based on selection criteria drawn up by the company unilaterally. In other words, the company did not consult with the union in advance on the selection criteria nor the criteria applied strictly conformed to those mentioned in the code as noted above.
Nevertheless, the company claimed that the selection was based on a point system embodying the objective criteria as stipulated in the code guidelines such as age from the point of view of physical fitness and endurance as ascertained from the claimant’s medical record, ability as assessed from the claimant’s performance record over a three year period and their conduct from their disciplinary record over a five year period.
The way the industrial court, in this case, sought to justify the employer’s retrenchment exercise makes one wonder whether the court indeed acted according to equity and good conscience as it ought to do. For example, the industrial court exonerated the employer for not consulting the union on the ground that there was no legal obligation on the part of the company to consult or warn its employees before retrenchment; (b) of course the court averred that in industrial law the burden of proof is on the employer to show that the factors he has relied on in selecting an employer for retrenchment are such as to prove that the employer has acted reasonably in his determination of the issue. However, the court argued that it is necessary to ask, not only whether the decision of the management was wrong but whether it is so wrong that no sensible or reasonable management could have arrived at the decision which was arrived at in redundancy selection. This case is illustrative of how, among the available tests, the test of reasonableness could come in handy for the industrial court to find the selection criteria followed by the company reasonable.
2. The same employer (The Malaysian Shipyard and Engineering Company) with the same point system of evaluation selcted 259 employees for retrenchment in 1987. It tried to justify its selection of employees to be retrenched but miserably failed not because the industrial court, in this case, doubted the point system but because the employer abused the point system in determining who should be retrenched or retained? This seemed to lend credence to the perception that the company developed the point system only as a matter of expediency to serve its vested interests.
Specifically, according to its own claim, any employer who received more than 72 points should be retrenched. But during the investigation by the Industrial Court, it was established that some employees who got more than 72 points were retained and some who got less than 72 were retrenched as well. No wonder the Industrial Court held the retrenchment exercise mala fide.
Advanced Micro Devices Export Sdn Bhd. Case is somewhat similar to the earlier shipyard case in that instead of the objective criteria spelt out in the code guidelines, the company followed its own skilled matrix evaluation to determine the suitable employees to be retained or retrenched. Approximately 200 employees were retrenched on the ground of downsizing of supervisory staff consequent on reorganization to improve efficiency. Of the six supervisors in his category, the claimant was retrenched in spite of the fact that he was the senior most among them with more than 20 years of service in the company.
The section manager claimed that the claimant was selected for retrenchment among the other supervisors in his category on the basis of rating them on behavioural skills, namely, coaching, organizing, planning, conflict resolution, interactive skill,team work and productivity. She claimed that she evaluated the claimant on these skills on her observation on his performance based on the briefing she obtained from and based on performance appraisal given by the claimant supervisor, and came to the conclusion that the claimant’s overall skills were less competitive in strength compared to the other supervisors; however, there was no signature in the skill matrix assessment form.
The court considered the fact that the claimant was the senior most among the other supervisors and that he had received a good rating in his earlier performance appraisal and in fact commended by the same section manager for his ability, his untiring efforts and tenacity. Furthermore, one of the junior supervisors retained was the claimant’s subordinate with only one year service.
It is interesting to note that though the court held the retrenchment of the claimant unjustified on the ground that it was in breach of the LIFO principle, by implication it seemed to have disapproved of the rating system unilaterally devised by the management which was neither objective nor based on objective criteria under the code. The court held that there had been a repudiation of the LIFO principle and the claimants termination when there was no redundancy was an unfair labour practice without just cause or excuse.

IV
Retrenchment : Adherence to Code Guidelines Under Collective Agreement
The collective agreement provisions dealing with retrenchment may be terms dealing with the mandatory steps to be taken in carrying out a retrenchment exercise such as a requirement to consult the trade union concerned where retrenchment is intended or to give notice both to the workers affected or their union before it is undertaken.
1. In the Dunlop Industries case the Supreme Court struck down an entire retrenchment exercise (involving 112 workmen) and reinstated the affected workers for non-compliance with the provision of the collective agreement requiring that advance notice be given by the company of any impending retrenchment exercise.
In fact, in this case, the employer did not give any advance notice to the Union as required but by-passed the union and gave two months salary to the retrenched employee in lieu of notice to the union.
The obligation of the employer under the collective agreement was to give advance notice to the union, not to the employees and as such the employer could not escape his responsibility of notice to the union. The Industrial Court in this case failed to recognize that the advance notice had to be given to the union as the party to the collective agreement, not to its employees as individuals.
2. Sometimes, the collective agreement may bind both the parties to the obligation of observing the code guidelines in retrenchment. Thus, in K.L.George Kent (M) Bhd. the issue was not whether the employer’s claim of redundancy was real but whether he complied with the provision 10.1 of the collective agreement which stipulated that `during the duration of the agreement both the parties shall abide by the code of conduct for industrial harmony’.
The dispute arose because of the compliant by the Union that the employer breached clause 23 of the code of conduct. Under this code guidelines, employees who are retrenched should be given priority of engagement/reengagement, as far as possible, by the employer when he engages worker.
In this case, when the employee hired new hands after retrenching the claimant he failed to offer the posts to the retrenched employees. The industrial court failed to find fault with this act or the employer, and in fact justified it on the ground that it is the retrenched employees who should have applied for the posts.
However, the High Court held that the Industrial court’s view of the employer’s act was unreasonable because the employer would only know if there exist vacancies. It is therefore the duty of the employer to make the offer.
It is indeed significant that the High Court ruled that the Industrial Court made a jurisdictional error in not considering clause 23 of the code which both parties to the collective agreement had agreed to follow.
3. Assembly Services case is an interesting case because it is quite intriguing. In this case, the company’s claim of redundancy was genuine but it had the obligation under the collective agreement to observe LIFO principle in selecting employees for retrenchment in consultation with the union. During the discussion and negotiation with the union, the company initially submitted a list of 18 names of workers to be retrenched but modified it with the deletion and addition of a few names as suggested by the union. In other words it was claimed and the Industrial Court accepted that the union agreed to the retrenchment exercise and the basis of selection. In view of this circumstance the industrial court upheld the retrenchment of the 18 workers even though the union lodged a complaint under S 26(2) of the Industrial Relations Act 1967 that the employer failed to follow the LIFO principle in retrenching them. The rationale for this decision of the industrial court seems to be that when the union agrees to seniority list prepared by the management, then it cannot plead violation of the rule of last come first out. Even though it is an obligation under the collective agreement. While the case appears to be rather straight forward, it is the hidden aspects of the case that makes it intriguing. For example, in modifying the original list presented by the employer , the employer accommodated the union request that some of the more junior serving employees be retained in preference to the more senior staff. Secondly, there is no indication whatsoover on whether the original list of the employer was in accordance with the LIFO procedure; most probably it was not. In the circumstance of tacit collusion between the union and the employer, it may not be surprising that the obligation under the collective agreement to follow LIFO procedure was never raised by any party, leave alone the union. In the circumstances the industrial court may be right in saying that “ we are of the opinion that it was conclusive proof that it was agreed that LIFO need not be followed”.
It cannot be denied that among the 18 workmen retrenched according to this collusive list there would be a few or more who did not deserve to be retrenched? is justice meted out to them when the industrial court justifies the retrenchment of all the 18 workers? is not enforcing the obligation to observe the LIFO procedure under the collective agreement imperative to ensure social justice? In the context of established misdemeanour of the union how can the industrial court shut its eyes to blatant injustice this entailed to the workman who should have been retained and not retrenched.
Of course the case is not similar to Dunlop Malaysian Industries for the union, in that case, lodged the complaint of non-compliance with the collective agreement under S 56(2) of the Act. Here it is a late lodged by the union under S26(2) of the Act.
Yet, the industrial court could have retreieved the situation: to renege on agreement is wrong under the rule of estoppel. But estoppel has no application in Industrial Law . In other words, to render justice to the helpless workers the industrial court should have investigated whether the 18 workmen were selected through LIFO procedure as required under the collective agreement. Mutual agreement to violate LIFO procedure under suspicious circumstance does not obsolve the parties from their obligation under the collective agreement.
V
Retrenchment : Adherence To Code Guidelines Without Obligation under Collective Agreement.
While the reviewing courts have impressed on the industrial courts that employer’s adherence to the code guidelines in retrenchment is mandatory when it is an obligation under the collective agreement with the union, the industrial courts have shown very little concern in taking into account the code guidelines in making decisions on retrenchment when such a binding obligation does not exist. However, it is interesting to note that in some cases the industrial courts had made pointed reference to the failure of the employer to adhere to these guidelines only when they had found a more basic ground for finding the retrenchment exercise unjustified. Some of these basic grounds for unjustified retrenchment include: the act of the employer when it is mala fide or it is tainted by motives of unfair labour practice or victimization or it is a blatant violation of the LIFO principle or getting rid of the workman when the job he was engaged in had not ceased or diminished.
1. For example, in David Distribution case the industrial court found that the retrenchment of the claimant as unjustified not only on the ground that the claimant’s job had not ceased or diminished but also on the ground of contravening the LIFO principle in retrenching him. Nevertheless, it is noteworthy, the industrial court specifically mentioned the employer’s failure to adhere to the code guidelines.
2. Similarly, in Trident Malaysia case the industrial court declared the company’s retrenchment exercise mala fide and tainted by unfair labour pratice on account its anti union overtones but made pointed reference to the employer’s failure to observe the code guidelines in no uncertain terms: The court was of the view that the provisions relating to redundancy and retrenchment in the Code of Conduct for industrial harmony were not adhered to by the company. And even if the retrenchment was bona fide the operating of the redundancy situation by the company would have been found to be unacceptable by the court as being unfair and the dismissal to be unjust therefore”. This impressive rhetoric notwithstanding, we are yet to come across a case where the industrial court found the retrenchment unjustified purely on the ground of failure to follow code guidelines.
3. In Behn Meyer case the court found the retrenchment exercise unjustified on the ground of violation of the LIFO principle; notwithstanding this substantive ground the industrial found fault with the employer for not offering the vacancies that arose in the company to the claimant. It even echoed the ruling of the High Court in George Kent when it said that it was incumbent upon the company to contact the claimant and offer him a vacancy.
4. Kejuruteraan Maju Sekitar Sdn Bhd v Chin Kok Leong (1992) ILR 373 is a case where the industrial court ruled the retrenchment of the claimant engineer mala fide on three counts: the company breached the LIFO principle by picking him in preference to his junior for retrenchment; the fact that the company appointing another to do his job a few months after claimants termination showed that there was no diminution or cessation of the claimant’s work. And finally the company acted mala fide for not consulting or warning the claimant of his redundancy. In fact, the claimant’s dismissal was effected with great speed for he was given one month salary in lieu of notice to terminate him.
To add insult to injury in all these cases even though the employer’s action was unjustified not only on substantive grounds but also on the grounds of blatant breach of the code guidelines, the industrial court did not find reinstatement as a fit and proper remedy for unjust retrenchment. It is indeed an irony that in the context of S 30(5) of the Industrial Relations Act 1967, employer’s double fault seems to have entitled them to get rid of the claimants through payment of compensation.
VI
Retrenchment Decisions : The Odd and the Unusal
1. Of the odd or the unusual cases the one in which the industrial court acted with compassion deserves to be dealt with first: This Trident Malaysia Case is indeed odd since the industrial court, may be for the first time, ordered payment of compensation to two of the claimants who have become deceased after the proceeding had begun
The industrial court in considering whether it would be in order to order payment of compensation to the deceased, observed that unlike the English statute on unfair dismissal, our Industrial Relations Act 1967 is silent on such cases where the workman has died during the pendency of the case…… This case was referred to this court as a trade dispute between the company and the union under Sec.26(2) of the Act and the claim therefore, was not of personal nature. Also the proceedings were at an advanced stage when the two claimants became deceased. It is also noted that the proceedings were delayed for several unavoidable reasons for no fault of the deceased claimants and that the personal participation by the deceased in the hearing was not necessary. This being the court of equity and good conscience, the court observed that it can see no obstacle to awarding compensation and backwages in respect of these two claimants up to the dates of their deaths - the money to go to their estates.
2. The KFC Technical Services case is unusal in that it is the only case, where the industrial court ordered punitive compensation by way of relief for victimisation by a multinational. The Industrial Court in KFC case first of all decided that the retrenchment exercise was a colourable exercise to show that there was a closure of the entire business. The true reason was to get rid of the union members; and the dismissal of the employees was therefore without just cause or excuse. Though only payment of compensation in lieu of reinstatement was ordered, the industrial court stated that "employers cannot with impunity resort to this unfair labour practice and get away with it by paying minimum compensation in lieu of reinstatement". Besides back wages, the court ordered punitive compensation at two months salary for every completed year of service to the retrenched employees. The High Court in upholding the Industrial Court decision added that "having regard to the reasons and circumstances leading to the dismissal of the employees, the amount of compensation which the industrial court described as punitive was justified.
Though it was established that the quantum of compensation to be ordered is within the discretion of the industrial court, KFC case remains still an odd case since no other industrial court, to the best of the author's knowledge, had emulated the salutory example of the industrial court in ordering a punitive compensation.
3. Vimaladawi's case is unusal in that it involves a trade union as the employer of the worker and it purported retrenchment of the claimant on the alleged grounds of the union's financial situation and of the reorganisation of the union secretariat was in fact a cover for victimisation.
The claimant Vimaladawi was an Assistant secretary in charge of administration; it is an executive post; it was established during the investigation that the union was not suffering from financial problems at the material time nor the demand for the claimant's job had ceased or diminished. The post of assistant secretary had not become redundant or abolished as the two other assistant secretaries were still employed by the union, one of them was junior to the claimant and therefore the union had also failed to observe the LIFO principle. The court stated that under the cover of reorganization the employer is not entitled to rid himself of employees who have offended him in some way or to promote the interests of some employees to the detriment of others. The decision of the court that the retrenchment of Vimaladawi was tainted with motives of victimisation is again a sad commentary on union's relationship with its own employees when victimization is the battle cry union raises against private employees.
Retrenchment Decisions : Bizzare and Puzzling
In the following two cases, the industrial courts seemed to have gone out of the way to justify the employer's retrenchment exercise.
1. In the FCB case the company retrenched 26 workers on the ground of downsizing necessitated by loss of profits due to soft and depressed market. However, the company continued to pay bonus and increments to its staff. When it was argued that the fact that the company was able to pay bonus to the staff showed that the company's business was not as bad as alleged, it was surprising that the industrial court advanced an unusual point of view to defend the company's action:
"It is true that in cases of mass retrenchment involving significant number of the workforce, those needed and retained by the company would be panic striken - it is only natural. It was accepted that the company paid bonus as a form of motivating those remaining. This was a crucial factor towards the retention of those still required by the company"
In the Supreme Corporation Case the industrial court admitted that there was a blatant violation of the LIFO procedure and yet justified the retrenchment of the claimant on a bizzare ground
"It is true that the claimant was senior to these two, and was asked to leave about two months earlier. In ordinary circumstances, the company should have applied LIFO, that is to say, retrenched one of these two secretaries and transferred the claimant to take her place. But according to company evidence, at that time, "things were moving so fast", in the circumstances, to apply LIFO would be like requiring people in a runway raft to change places when it was being imminently swept by the rapids over the edge of the waterfalls. In the circumstances, the Last in First out, procedure was acceptably departed from by the company, in the view of this court and so it rules," The court in the light of all facts and surrounding circumstances ruled that the dismissal of the claimant was justified. Bizzare and puzzling indeed.
VII
Retrenchment Relief : Reinstatement or Compensation
A scrutiny of the Industrial court awards would reveal that the courts have made reinstatement more or less a lost remedy for unjust dismissals. However, one would expect the courts to order reinstatement at least in deserving cases of retrenchment; it is because retrenchment, unlike dismissal for misconduct, is usually resorted to during depressed business environment when opportunities for alternative employment are limited. Unfortunately, it looks as if the privilege of ordering reinstatement as remedy for unjust retrenchment belong to the reviewing courts. And ordering payment of compensation is the rule rather than an exception for our industrial courts.
In all the cases analysed for the purpose of this presentation, the pattern was evident in the relief ordered by the courts, and it is not surprising to discover that the courts had ordered reinstatement in only three of the cases included in this analysis.
1. In Metro Health Case the claimant Norshila was a senior manager (legal) and the court found that her termination from service unjustified. The act of the company purportedly in pursuance of a retrenchment exercise caused by financial constraint and the closure of the legal department to which the claimant was attached was really a device to cloak a colourable or mala-fide exercise of power and an act of victimisation. The claimant was awarded back wages and reinstated as senior manager without any loss of benefits.
2. The Ming Court Beach Hotel retrenched five permanent employees and hardly three weeks after their retrenchment, the hotel wrote to them asking them if they were willing to work as casual workers. The hotel was in a sound financial position at the material time and its redundancy claim was unjustified. The court ordered reinstatement of all the five claimants into their former jobs without loss of seniority and benefits.
3. The Dunlop Malaysian Industries case is of great interest to us because of two reasons; Firstly, the industrial court ordered reinstatement of 112 union members and secondly, it ordered reinstatement in response to the union complaint of non-compliance with the collective agreement under S 56(2), not under S 26(2) of the Industrial Relations Act 1967.
Though the case was lodged under S 56(2) of the Industrial Relations Act 1967 as a non-compliance dispute, the industrial court ventured perhaps for the first time, to order reinstatement without loss of seniority or pay under S 56(2)(b) which stipulated that the court "may make such order as it deems fit to make proper rectification or restitution for any contravention of any term of such award or agreement."
This rather unusual step taken by the industrial court in ordering reinstatement under S 56(2) (b) was upheld by the Supreme Court.

Retrenchment Decisions : Outrageous and Atrocious
The decision of the industrial court in the Aluminum Company case not to order reinstatement for unjustly retrenched claimant, Mustapha in the following circumstances admitted as true by the Industrial Court would undoubtedly be viewed as outrageous. The court made it very clear in its award that "there is evidence that the claimant had registered himself with the employment exchange seeking employment as a production foreman. He has not found one yet. He has also tried to get other jobs. He has been to walk in-interviews at Bank Negara, Hyatt Hotel and Shangrilla Hotel for the job of a driver. He has been unsuccessful. There is also evidence he has taken out part of his employees Provident Fund contributions to pay towards his house loan."
The court was convinced that the claimant's job was still in existence after he was retrenched; yet the court said that it would not be in the interest of both the parties to order reinstatement to the claimant to his former post.
The court earlier declared that the retrenchment of Mustapha under the guise of redundancy after his 23 years of faithful service to the company was unjustified. While its role in protecting the rights of the worker seemed exemplary, the way it sought to balance the interest of the employer with that of the workman by refusing to order reinstatement is indeed a sad commentary on the competance of the court to act according to equity and good conscience as it ought to.
Second, the Industrial Court decision in Harris Solid State Case came in for severe criticism by the Court of Appeal. In this case Gopal Sri Ram observed that "the so called sale of the first appellant to the second appellant, the making of the offer of employment and the alleged closure of the first appellant's business were done merely in the pretended exercise of managerial power. The real aim of the whole charade was apart from putting an end of the life of the union, to punish the respondents for their union activity".
One wonders how the allegation of victimization could go unnoticed by the industrial court when the Court of appeal found that this was a case of an employer who had chosen to dismiss his workmen purely because of their trade union activities; in fact, it went to the extent of asserting that "there can, in our judgement, be no clearer case of victimization and unfair labour practice".
In reviewing the decision of the industrial court, the Court of Appeal sought to offer two grounds for this myopic veiw of the industrial court. First, it pointed out that the Chariman of the court "adopted the wrong approach to the issue of victimization. He should have asked himself the question, "does the totality of evidence, when objectively viewed, reasonably support the conclusion that the services of the claimants were terminated because of their union activities? Instead, he appears to have asked himself an inrrelevant question, namely, whether the respondents had positively proved vicitimization. It is an irrelevant question because it is against established authority and imposed upon the respondents an unusually heavy burden to produce positive evidence in support of the claim of victimization, a burden which the law does not impose.
Secondly, in the stricture directed against the Chairman of the industrial court, the Court of Appeal seemed to attribute his short sightedness to his ideological bias though it did not so label it explicitly: "meaning no disrespect what so ever to the learned Chairman who handed down the third award, his comments against the respondents (claimants who are unionists) have left us with the impression that it was quite wrong of the respondents to save the union from total destruction. Comments which carry such a tenor are wholly inappropriate when they come from the Chairman of a tribunal which has been established to ensure the proper protection of the rights of workmen, whether unionised or not. It may lead one to assume, with good reason, that the particular chairman is averse to the carrying out of union activities and this is surely not so.
Finally, in considering the relief to be offered to the victimized workmen, the Court of Appeal went on record by stating that "in the circumstances of the case, we do not consider that compensation is the proper remedy. For, otherwise, employers will be encouraged to terminate the services of their unionised workmen, confident in the expectation that all they have to face is an award of compensation - a small price to pay for being rid of trade unionists. The remedy of reinstatement is, therefore, the only just and proper remedy that is appropriate to meet the facts and circumstances of the present case. Even though some six years had passed since the unionists' services were terminated, Gopal Sri Ram JCA ordered reinstatement of all of them with no loss of seniority or benefits, monetary or otherwise.
VIII
Conclusion
This analysis of selected cases on retrenchment attests to the satisfactory performance of the industrial court in determining whether or not the claimed redundancy leading to retrenchment was real and for valid reasons.
To the specific question whether the industrial court has been adhering to the code guidelines in determining retrenchment cases, our analysis shows that the answer is very much qualified. While the courts have been consistent in evaluating whether the employer had followed the LIFO procedure in selecting employees to be retrenched, they have not shown any concern for the employers' failure to adhere to any of the code guidelines unless it is an obligation under the collective agreement. As pointed out, when they find a basic reason for unjust retrenchment, some courts have paid lip service to the code guidelines by finding fault with the employer for not following code guidelines. Even in enforcing LIFO principle, not infrequently, the courts seemed to have gone out of the way to justify the employers' conduct in departing from the requirement of this principle. Finally in ordering relief for unjust retrenchment, payment of compensation is the rule, reinstatement an exception.
On the basis of the industrial court cases analysed in this article, it may not be far wrong to conclude that the scales of industrial court justice are tilted more in favour of the employer than in favour of the workman's right to livelihood. This imbalance could be rectified only when the industrial court in deciding each case referred to it, constantly reminds itself that it is not an ordinary court of law but a court of arbitration, and act according to equity and good conscience in the true sprit of S30(5) of the Industrial Relation Act 1967 and acquire the courage to use the instrumentality of S 30(5A) of the Act to pave the way to translate code guidelines into case laws. This would become possible only when the awards of the industrial courts represent the finest expression of industrial jurisprudence, not the saddest reflection of the unduly harsh common law in deciding industrial disputes. Perhaps Gopal Sri Ram JCA was right in forcefully pointing to the need that not only the industrial court but the reviewing courts also should learn to eschew their common law orientation in deciding industrial disputes.

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