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2024 MarsdenLR 1142
INDUSTRIAL COURT MALAYSIA
Tham Yuet Wah – Appellant
Versus
Butterfly House (PG) Sdn. Bhd. – Respondent
9/4-1354/22
Employers may dismiss employees for redundancy if the reorganization exercise is genuine, bona fide, and supported by objective evidence of financial necessity. The burden of proof lies with the employer on a balance of probabilities, and strict seniority application is not required during comprehensive operational downsizing.
Headnote:(A) Industrial Relations Act 1967 - Section 20(3) - Retrenchment - Dismissal - Just cause or excuse - Employer carries burden of proof to establish redundancy on the balance of probabilities - Industrial Court duty is to determine whether reason for dismissal is substantiated. (Paras 12, 13, 14, 16)
(B) Managerial Prerogative - Employers possess the right to reorganize business operations for economic viability - Exercise must be bona fide and not for collateral purposes - Financial decline during global movement restrictions constitutes a valid basis for organizational downsizing. (Paras 22, 33, 40)
(C) Last In First Out (LIFO) - Principle is not an absolute rule - Application remains subject to specific business justifications and departmental closures - Employer holds no strict legal obligation to offer alternative employment to redundant staff. (Paras 53, 65, 66)
Facts of the case:
The claimant was a long-serving employee of a business operation in the tourism sector. Due to government-mandated movement restrictions resulting in severe financial loss and a reduction in visitors, the employer initiated a comprehensive restructuring and downsizing exercise. The claimant’s employment was terminated as a result. The claimant challenged the retrenchment, alleging it was unfair, lacked legitimate grounds, and failed to follow the principle of seniority.
Findings of Court:
The court found that the employer provided sufficient evidence, including audited financial statements, to demonstrate a genuine and urgent need for restructuring due to economic hardship. The retrenchment exercise was determined to be a bona fide administrative action taken for the survival of the business. Additionally, the court noted that the claimant was offered but rejected reinstatement, further supporting the conclusion that the initial retrenchment was not a manipulative act.
Issues: The main issues were whether a genuine redundancy situation necessitated the retrenchment, whether the restructuring was conducted in a bona fide manner, and whether the dismissal followed appropriate procedures, including the application of seniority principles.
Ratio Decidendi: An employer has the prerogative to reorganize its commercial undertaking for legitimate business reasons, such as financial viability, provided the decision is not malicious. Once the employer establishes, on a balance of probabilities, that the position has become redundant due to economic necessity, the court will decline to interfere with the managerial power to dismiss. Seniority rules like LIFO serve as a guideline but do not strictly prohibit redundancy in instances of total department or operation closure.
Result: Claimant's case dismissed.
| Table of Content |
|---|
| 1. overview of procedural background and case facts. (Para 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9) |
| 2. summary of claimant's allegations and employer's justification. (Para 10 , 11) |
| 3. established legal standards governing unfair dismissal and redundancy. (Para 12 , 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21 , 22) |
| 4. assessment of bona fide organizational restructuring due to hardship. (Para 23 , 24 , 25 , 26 , 27 , 28 , 29 , 30 , 31 , 32 , 33 , 34 , 35 , 36 , 37 , 38 , 39 , 40) |
| 5. verification of genuine redundancy and procedure compliance. (Para 41 , 42 , 43 , 44 , 45 , 46 , 47 , 48 , 49 , 50 , 51 , 52 , 53 , 54 , 55 , 56 , 57 , 58 , 59 , 60 , 61 , 62 , 63 , 64 , 65 , 66) |
| 6. final reasoning confirming valid retrenchment and dismissing the claim. (Para 67 , 68 , 69 , 70 , 71 , 72 , 73 , 74 , 75 , 76 , 77) |
AWARD
[1] This is a reference from the Director General, Department of Industrial Relations Malaysia to the Industrial Court of Malaysia according to s 20(3) of the Industrial Relations Act 1967 (hereinafter referred to as “the IRA”) in respect of the dismissal of Tham Yuet Wah (hereinafter referred to as “the Claimant”) by his employer, Butterfly House (Pg) Sdn Bhd (hereinafter referred to as “the Company”) effective 1 August 2021.
A. Proceeding in The Industrial Court
[2] This Court has considered the following cause papers and documents in handing down this Award, namely:
(a) the Claimant’s Statement of Case dated 11 November 2022;
(b) the Company’s Statement in Reply dated 13 December 2022;
(c) the Claimant’s Rejoinder dated 20 December 2022;
(d) the Claimant’s Witness Statement (Tham Yuet Wah) marked as “CLWS-1”;
(e) the Company’s Witness Statement (Ong Chiew Hoon) is marked as “COWS-1”;
(f) the Company’s Witness Statement (Chew Ne Leang) is marked as “COWS-2”;
(g) the 1st Claimant’s Bundle of Documents marked as “CLB-1”;
(h) the 2nd Claimant’s Bundle of Documents marked as “CLB-2”;
(i) the 1st Company’s Bundle of Documents marked as “COB-1”; and
(j) the 2nd Company’s Bundle of Documents marked as “COB-2”;
[3] According to the directions of this Court, the parties in this matter filed their respective submissions accordingly. This Court received the following written submissions of the parties namely the Claimant's written submissions, the Company's written submissions, and the Claimant's written submissions in reply.
B. Brief Facts of the Case
[4] The Claimant is an individual with the address of Blok 2A-06-08, Jalan Sungai Emas, Mukim 17, 11000 Batu Feringgi, Penang
[5] The Company operates a butterfly farm and tourist attraction known as Entopia at Teluk Bahang, Penang (“Entopia”).
[6] The Claimant was employed and promoted to cashier via a contract dated 28.08.1995 (CLB-1, p 3).
[7] The Company made a final decision to close the park until restrictions were lifted when the Government announced a total lockdown beginning in June 2021.
[8] The Claimant’s service was terminated by the Company on 1 June 2021.
[9] The Claimant’s last drawn salary is RM2915.00
C. The Claimant's Case
[10] In his Statement of Case, the Claimant avers that–
(a) The act of the Company in accepting the Wage Subsidy Program (“WSP”) offer from PERKESO gave a representation and/or a legitimate expectation to the employees of the Company (including the Claimant) that the said employees will not be retrenched or otherwise ceased to be employed by the Company as long as the Company accepted the said WSP from PERKESO during the MCO;
(b) The Retrenchment Notice was false, fraudulent, misleading, inaccurate, without basis in fact or law, and/or in any case amounts to an unlawful termination of the employment of the Claimant with the Company;
(c) In the Retrenchment Notice, the Respondent had fraudulently, deliberately or otherwise stealthily concealed the indisputable fact that the Company had taken WSP from PERKESO;
(d) The Company took full benefit of the WSP but had failed to protect the legal or legitimate interests of the Claimant;
(e) The
