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2024 MarsdenLR 795
INDUSTRIAL COURT KUALA LUMPUR
JOSE LUIS DREYFUS PUERTAS – Appellant
Versus
AIR ASIA BERHAD – Respondent
Award No: 1410 Of 2024 [Case No: 21/4-597/21]
The retrenchment of the employee was justified due to genuine redundancy caused by financial difficulties, and the company acted in good faith, adhering to accepted industrial practices.
Headnote:(A) Industrial Relations Act 1967 - Section 20(3) - Dismissal of employee - Claimant dismissed due to redundancy amid financial difficulties exacerbated by the Covid-19 pandemic - Company provided evidence of significant financial losses and operational challenges, justifying the need for retrenchment - Court found dismissal was bona fide and in good faith, adhering to industrial practices. (Paras 1, 3, 26, 73)
(B) Retrenchment - Justification for retrenchment - The company demonstrated genuine redundancy and followed proper procedures in selecting employees for retrenchment - Court emphasized that managerial prerogative allows employers to make such decisions, provided they act in good faith. (Paras 21, 41, 72)
Facts of the case:
The Claimant, a foreign national employed as a Captain, was dismissed by Air Asia Berhad due to redundancy amid severe financial losses reported by the airline, worsened by the Covid-19 pandemic. The Claimant argued the retrenchment was wrongful, lacking proper justification and adherence to the Last In First Out principle. (Paras 6, 8, 9)
Findings of Court:
The Court found the retrenchment was justified, confirming that the Claimant's position had become redundant due to a significant decline in demand for air travel, and the company acted bona fide in its decision. (Paras 73)
Issues: The main issues were whether the retrenchment was justified by genuine redundancy, whether the company acted in good faith, and adherence to the Last In First Out principle. (Paras 26)
Ratio Decidendi: The Court ruled that the retrenchment was a necessary response to financial difficulties, affirming that the company had the right to reorganize its workforce and that the LIFO principle is not mandatory in retrenchment exercises. (Paras 49, 72)
Result: Claimant's claims dismissed.
AWARD
Reference
[1] This is a Ministerial Reference dated 29 January 2021 under s 20(3) of the Industrial Relations Act 1967 ("the Act") arising out of the dismissal of Jose Luis Dreyfus Puertas (hereinafter referred to as "the Claimant") by Air Asia Berhad (hereinafter referred to as "the Company") with effect from 8 April 2020 for a decision and an Award to be handed down.
[2] The parties to the instant matter are Jose Luis Dreyfus Puertas (herein-after referred to as "Claimant") and Air Asia Berhad (hereinafter referred to as "the Company").
[3] This dispute before this Honourable Court emanates from a Ministerial reference pursuant to s 20(3) of the Industrial Relations Act 1967 (" IRA 1967") in respect of the dismissal of the Claimant effective 8 April 2020.
[4] The hearing of this matter proceeded over three (3) days on 22 February 2023, 23 August 2023 and 8 November 2023, during which the Company produced two (2) witnesses as follows:
3.1. Lavinia Louis, Manager, Financial Controller ("COW-1"); and
3.2. Sia Lay Teng, Manager, People Solutions, Group People & Culture ("COW-2");
[5] The Claimant produced only one (1) witness ie himself, during the proceedings in support of his case.
Backdrop
[6] Due to amongst others, the global economic changes and the difficult operating environment in the airline industry, particularly in the Asia Pacific region, the AirAsia Group had experienced severe financial difficulties. In this regard, AirAsia Group Berhad ("AAGB") reported a net operating loss of RM457 million in the year 2019. [refer: p 5, COB1]
[7] The economic challenges above were aggravated by the Covid-19 pandemic which resulted in the cancellation of numerous flights and the grounding of several aircrafts. The Malaysian government implemented the Movement Control Order effective 18 March 2020 which significantly restricted interstate and international air travel. In light of the above, the Company curtailed hiring, suspended all non-essential duty travel, deferred bonuses and merit increments, offered unpaid leave, cancelled events and reduced salaries in an effort to reduce its operational costs. However, as the said cost-cutting measures were unsuccessful, organizational changes were implemented across the AirAsia Group which entailed the reduction in workforce to ensure the financial stability and sustainability of the Company. Therefore, the Company had no alternative but to undergo a business alignment exercise to retain a lean and efficient operations team of pilots.
[8] Based on the above backdrop, it is apparent that the disputes emanate over the retrenchment of the Claimant by the Company. The challenge posed by the claimant against his retrenchment was premised on the contention that the retrenchment was wrongful, void, inoperative, done in a bad faith, did not follow the principle of Last In First Out ("LIFO") and in breach of the provision on retrenchment in the Code of Conduct for Industrial Harmony ("Code").
Salient Facts
[9] The Claimant is a foreign national who was employed with the Company as a Captain on a fixed-term period of 24 months commencing on 3 December 2018. According to his Offer of Employment dated 9 November 2018 ("Offer of Employment"), any further extension of the Claimant's fixed-term contract was subject to the approval by the Civil Aviation Authority of Malaysia ("CAAM") and the Malaysian Immigration Department. The Offer of Employment and the addendum annexed thereto however did not provide that the Claimant's fixed-term contract was automatically renewable upon the expiry of the same. In fact, the Claimant's employment pass was only valid until 1 December 2020. This is a fact that this Court found nothing to doubt with.
[10] Due to, amongst others, the global economic changes and the difficult operating environment in the airline industry, particularly in the Asia Pacific region, the AirAsia Group had experienced severe financial difficulties. In this regard, A
