2024 MarsdenLR 12

INDUSTRIAL COURT MALAYSIA
Harik Bin Kamarudin @ Fauzi – Appellant
Versus
Mara Corporation Sdn. Bhd. – Respondent
2(1)/4-2744/21

An employer retains the right to terminate employment on grounds of redundancy if the initial recruitment process was unauthorized, violating established financial limits of authority, provided the termination is executed bona fide to rectify the resulting budgetary deficit and facilitate necessary organizational restructuring.

Headnote:(A) Industrial Relations Act 1967 - Section 20(3) - Unfair dismissal - Probationary employee - Termination - Whether the termination of a probationary employee is with just cause or excuse - Burden of proof lies on the employer to show the dismissal's justification on a balance of probabilities. (Paras 39, 41, 42, 44)

(B) Employment Law - Redundancy and Retrenchment - Employer's right to reorganize - Whether an unauthorized appointment creating a budget deficit constitutes valid grounds for termination - Where an appointment violates the internal limits of authority and creates a labor surplus, the employer acts within its rights to terminate the employee as part of a bona fide reorganization process. (Paras 48, 125, 126)

(C) Company Law - Indoor Management Rule - Applicability in employment disputes - While an employee may assume internal procedures are complied with, the employer is entitled to enforce its financial and administrative guidelines to prevent unauthorized expenditure and ensure internal corporate governance. (Paras 60, 64, 77)

Facts of the case:
The claimant, who was in a probationary period of employment, had his service terminated following a shift in corporate leadership. The employer argued that the claimant’s initial hiring by the former chief executive was unauthorized as it lacked board approval and exceeded specified budgetary limits, resulting in financial exposure. The claimant contended that the termination was unfair and that he was entitled to assume that his appointment was regular.

Findings of Court:
The court determined that the employer established that the dismissal was driven by the necessity to rectify unauthorized recruitment and address significant financial overruns. The termination was not based on performance but on a genuine redundancy. The court ruled that the company’s internal administrative procedures and financial controls were legitimate and that the claimant’s position was surplus to the company’s requirements.

Issues: The central issues were whether the termination of a probationary employee without performance-based reasons constituted a just cause and whether hiring processes conducted outside of an organization’s internal limits of authority justify a subsequent redundancy-based termination.

Ratio Decidendi: The court established that an employer possesses the prerogative to restructure its business and workforce for the purpose of economic efficiency. An appointment made in gross violation of internal financial and administrative policies can lead to a valid finding of redundancy when the organization must rectify the resulting fiscal breach.

Result: Claim dismissed.