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The Law in Relation to Retrenchment in Malaysia
Asiah Bidin, UUM

The world was plunged into a global economic recession some two years now, and is still coping with trying to stay afloat. While some countries have remained buoyant throughout the crisis, others are already seeing signs of drowning.
This global infection has also affected Malaysia. And, as prove of the extensive reach of the downturn, many have been struck down as retrenched casualties.

Hundreds and hundreds of employees have been laid-off in what companies call 'reorganizations'. This word is used widely now and is now commonly known among the local workforce.

This brings us to the question, what is retrenchment? What are the conditions for laying-off an employee?
One would expect that such a word as retrenchment might have its specified definition. However, there is no definition of the word in any local labour legislation.

By norm, retrenchment refers to a surplus of labour as a result of reorganization in a company [in any manner for the purpose of economy or convenience (award 342/1992)]. An employer is generally justified in retrenching his employee when his or her service is in excess of requirements. In other cases, a certain posts might become obsolete, thus resulting in a reduction, diminution or cessation on the type of work the employee has been performing.

In Malaysia, the employer is required to report to the Labour Department under the Ministry of Human Resource before any retrenchment can take place.
The Labour Department has been empowered to administer and enforce labour standards as well as lay down protection measures under stipulated labour laws.
Apart from that, there is also the Department of Manpower, which functions are to undertake the registration and placement of job seekers in vacancies reported by employers. This department also provides career guidance services to job seekers, administers the Private Employment Agencies Act 1981 and regulates private employment agencies.
It is also responsible for establishing effective labour market information services to facilitate labour market clearing, job placements and many others.

Despite the existence of all these departments to stand guard over employees' welfare, many employers are still taking unfair advantage of the current economic situation, by retrenching their employees without paying due redundancy benefit.

As far as retrenchment is concerned, an employment can only be terminated in bona fide instances, or in true cases. An employer cannot actuate retrenchment by victimization or resorting to unfair labour practices.
In Credit Corp.(M) Bhd v. Rahime Muhamed (1997) 2 ILR, it was held that the company has to show absolute transparency and honesty so as to ensure that retrenchment was carried out in a genuine context.

In the case of Radio & General Trading Sdn. Bhd and Pui Cheng Teck & Ors (award 243/1990), two main factors were laid down in considering if the employer did act bona fide when retrenching the employee.
The landmark factors in dispute were if there was a surplus of service of an employee, and whether a redundancy situation truly did exist. And, these two factors will have to be aligned with labour laws for laying-off.
The law provides that in exercising retrenchment, the employer must comply with the 'last in first out' principle (LIFO).

Apart from acting bona fide, the other element to be adhered to by the employer is whether the retrenchment is within the ambit of the Code of Conduct for Industrial Harmony.
Initially, this code was set up to provide detailed provisions regarding redundancy. It lays down principles, guidelines and conditions, preceding retrenchment in order to achieve industrial harmony.
Among them, the code requires the employer to give a proper warning of impending redundancy and to consult the employee concerned. The code also suggests that the employer should make a reasonable effort to look for an alternate employment for the employee before he is retrenched. The employer can also make an offer to the employee concerned to opt for voluntary retirement and pay him retrenchment and retirement benefits.

In this regard section 30(5A), Industrial Relations Act, 1967, in approving the existence of the code, mentions that in when making a decision or award, the Industrial Court may take into account any code or agreement to the employment practices. However, there are cases, where the provision in section remained as a code and was not adhered in the court.
In the case of Malaysia Shipyard & Engineering Sdn. Bhd. Johore Bharu v. Mukhtiar Singh (1991) 1 ILR 627, the court held that there is no legal obligation on the part of the company to consult its employee before retrenchment. In other words, it is not the legal duty of an employer to have to give advance warning to his employee on the possibility of retrenchment.

Generally, the court will rule that any retrenchment practice is unfair if it is either mala fide, actuated by victimization, or carried out under unfair labour practices (award 245/1986).
Failure to follow the LIFO principle can also constitute unfair retrenchment, unless the employer has a very valid reason to depart from it. Since the LIFO principle is not a statutory provision, it serves merely as a guideline to be followed in order to avoid unfair retrenchment.
In Supreme Corporation Bhd and Doreen Daniel & Ong Kheng Liat (award 349/1987), the court pointed out that the LIFO is not a mandatory rule which can be departed from by an employer when retrenching staff.

If the employer fails to comply with the law, relating to redundancy and retrenchment in the Code of Conduct for Industrial Harmony, the employee has the right to seek judgement for unfair retrenchment under section 20 of the Industrial Relations Act, 1967.

Di mana-mana hari ini tatkala hujung tahun saban kali kita mendengar jargon-jargon popular seperti retrenchment, VSS, bonus, naik pangkat, SSM, SSB heboh diperkatakan. Sudah hampir sebulan tatkala saya menyepikan diri, perkataan-perkataan itu berlegar di dalam kepala. Kadang-kadang tidur yang amat diperlukan jadi tidak lena kerana perkataan-perkataan itu sering bermain dalam fikiran. Rumours atau khabar angin sudah menjadi mainan mulut bila isu-isu seperti ini dihangatkan. Keadaan pejabat yang tenteram jadi ribut, keadaan kerja yang teratur jadi kelam-kabut angkara penyebar khabar angin. Saya turut menjadi mangsa. Penjelasan perlu sewaktu saat-saat sebegini agar dapat menjernihkan yang keruh. Apa yang pasti saya sebagai manusia berakal mahupun pilihan dan bukan mengikut membuta-tuli.

"Relocate me to different department or else I resign", itu kata dua dari saya. Muktamad. Saya tahu sayang mereka terhadap saya terlalu kuat.