Back
2021 MarsdenLR 1160
INDUSTRIAL COURT SARAWAK
KESATUAN PEKERJA-PEKERJA INDUSTRI PERKAYUAN SARAWAK – Appellant
Versus
MAGNA FOREMOST SDN BHD – Respondent
Award No: 123 Of 2021 [Case No: 8/2-2271/19]
Salary adjustments must be substantiated by evidence of cost living increases and achievable by the company's financial capacity.
Headnote:(A) Industrial Relations Act 1967 – Sections 26 and 30 – Ministerial reference regarding the 4th Collective Agreement – The court addressed financial constraints for salary adjustments, rejecting proposals from the union due to insufficient justification and financial implications. (Paras 13, 30, 64)
(B) Burden of proof lies on the proposing party, illustrated by the case PIHP (Selangor) Bhd v. Kesatuan Kebangsaan Pekerja-Pekerja Hotel, Bar & Restoran Semenanjung Malaysia & Anor. (Paras 15, 13)
(C) Economic factors, such as inflation and company financial capacity, should guide salary negotiations, as highlighted in Malayan Commercial Banks Association v. National Union Of Bank Employees. (Paras 48, 37)
Facts of the case: The Union and the company could not reach an agreement on the 4th Collective Agreement covering 1 January 2019 to 31 December 2021, leading to a court intervention. (Paras 2, 3)
Findings of Court: A salary adjustment of 4% was granted based on the inflation index, while other union proposals were rejected. The financial sustainability of the company was prioritized in the decision. (Paras 52, 64)
Issues: Whether the union's proposed adjustments were justifiable in terms of cost of living increases and company financial capacity. (Paras 11, 30)
Ratio Decidendi: The court reinforced that proposals must be justifiable through clear evidence and that economic sustainability is crucial in labor negotiations. (Paras 52, 53)
Result: A 4% salary adjustment is permitted, while other union proposals are denied.
AWARD
[1] This is a ministerial reference made under s 26(2) of the Industrial Relations Act 1967 ( IRA ) dated 20 November 2019 in relation to the 4th Collective Agreement (Collective Agreement/CA) between Kesatuan Pekerja-Pekerja Industri Perkayuan Sarawak (Union) and Magna Foremost Sdn Bhd (company) after the parties' failure to conclude it. There had been three Collective Agreements previously between the union and the company. The 3rd Collective Agreement was concluded on 12 January 2016 and the effective date of that Collective Agreement was from 1 January 2016 and remained in force for a period of three years until 31 December 2018.
Background
[2] The parties had held meetings with the aim of concluding the 4th Collective Agreement but were unable to agree on a number of articles.
[3] Hence, an application was made for Ministerial reference to the court for an award in respect of the 4th Collective Agreement which was for a period of 1 January 2019 to 31 December 2021.
[4] The company is a joint venture (JV) between the Samling Group and the Masonite company of USA for the production of molded door skins for both international and local markets.
[5] The parties in the instant case were not represented by counsel. The court sessions were informal and the court must commend the parties' respective representative for their efforts in settling some of the initially disputed articles and eventually leaving only five disputed articles for resolution.
[6] When this case came up for mention on 11 August 2020, 12 August 2020 and 24 September 2020, the said dates were used by parties to negotiate and the chairman also mediated for settlement. In their attempt to amicably settle this case, the union on 12 August 2020 withdrew new Article 53 (Exit Pass Permission) and the parties on the same date also agreed to the following:
Article 13 - Working Hours
Article 33 - Meal Coupon
Article 47 - Full Attendance Allowance
Article 52 (New) - Plant Shut Down
[7] As the union had withdrawn Article 53 and the parties had agreed on Articles 13, 33, 47 and new Article 52, the court ordered the union to amend its Statement of Case to reflect only the disputed Articles which are stated below:
i. Article 13A: Daily Working Allowance (New Proposed Article)
ii. Article 31: Transport Allowance
iii. Article 48: Housing Allowance
iv. Article 54: Salary Adjustment (New Proposed Article)
v. Article 55: Long Service Allowance (New Proposed Article)
[8] During the hearing on 1 March 2021, the company called one witness, Lionel Liew Li Lung (COW1), Operations Manager, who directly sees the Operations of the Company. The union called one witness, Denis Anak Lukong (CLW1), the Branch Chairman of the union, who is employed as a Senior Boiler Supervisor of the company.
[9] The company at the outset stated that it is not able to accede to the demands of the union in the disputed articles above citing financial constraint.
[10] COW1 testified that over the last few years, the demands for the product as well as the price of the product in the international market had gone down due to stiff competition from other suppliers of similar product. This competitive business environment has directly contributed to lower income of the company compared to before.
[11] COW1 explained that other factors are also impacting the financial position of the company. COW1 in his evidence explained that the government imposition of the Movement Control Order (MCO) due to COVID-19 pandemic since March 2020 had brought business to total closure. At the time of hearing, COW1 said that the MCO in various forms lasted until August 2020. The foreign JV partner had expressed their concern as the company was facing stiff competition from other manufacturers of molded door skins and that this competitive business environment had hindered the company's ability to raise prices of its products over the past several years. Thus, in the current economic situation, the JV partner had
