In retrenchment cases, the principle of Last In, First Out (LIFO) must consider total years of service, including previous employment, if continuity of employment exists post-transfer.

[1] This is an appeal by the appellant against the decision of the Court of Appeal which dismissed the appellant's appeal against the decision of the High Court dismissing the appellant's application for an order of certiorari to quash the Industrial Court award dated 26 August 2004 ("the 2004 award"). The 2004 award was made by the Industrial Court pursuant to a reference made under s 20(3) of the Industrial Relations Act 1967 ("IRA") arising out of the dismissals of Kamaruddin Kana Mohd Sharif & Ors ("the respondents") by the appellant.

Background Facts

[2] The appellant was engaged in the manufacture of semiconductor lead frames which were components used in the manufacture of semiconductor integrated circuits. It was a subsidiary of Malaysia Pacific Industries Berhad ("MPI") and was part of the Hong Leong Group of companies. The appellant was formerly known as Exclusive Distinction Sdn Bhd and was incorporated on 16 June 1992. With effect from 30 August 1995, the appellant was given a manufacturing licence by the Ministry of International Trade and Industry ("MITI"). On 18 December 1995 the appellant changed its name from Exclusive Distinction Sdn Bhd to Dynacraft Industries Sdn Bhd (its present name).

[3] On 9 November 1995, a sale and purchase agreement ("the 1995 Agreement") was executed between, among others, National Semiconductor Corporation (a Delaware Corporation), Dyna-craft Inc (a Californian Corporation), Dynacraft Sdn Bhd ("DSB") and MPI. By this agreement the assets and business of DSB were sold to MPI but transferred to its subsidiary the appellant.

[4] By letters dated 19 January 1996 DSB informed its employees including the respondents that with the sale of its assets and business to MPI, their employment with DSB would cease at midnight on 20 January 1996.

[5] By letters dated the same day (19 January 1996), the appellant made offers of continued employment to all employees including the respondents.

[6] The respondents accepted the offer of continued employment by the appellant.

[7] Since January 1998, the appellant's business was adversely affected by the economic downturn faced by the COUNTRY and the world at large. There was a significant reduction in the business level of the appellant which affected its financial position. The appellant undertook a number of measures to reduce its operating costs. Despite the various cost-cutting measures the appellant continued to suffer losses. It had no alternative but to undertake a reorganisation and rationalisation of its operations. This resulted in a number of positions becoming redundant. The appellant claimed that 19 employees became redundant. The respondents were among them. By letters dated 17 July 1998, the appellant retrenched the redundant employees including the respondents with effect from 20 July 1998.

[8] The respondents were paid the following:

(i) salary up to 20 July 1998;

(ii) salary in lieu of balance of annual leave not taken;

(iii) variable incentive bonus-second half FY 1998;

(iv) pro-rated bonus for 1998;

(v) salary in lieu of notice;

(vi) termination benefits of 20 days' salary for each year of service, subject to cap of six year service.

[9] Following the retrenchment, the respondents filed a claim for reinstatement under s 20 of IRA. On the evidence before him, the learned chairman of the Industrial Court found that there was a basis for the appellant's reorganisation of its operation and to take cost-cutting measures including shedding of its workforce.

[10] However, the Industrial