Ohaiyo! This piece is really, a liberal retelling of the court case of Chang Choon Hooi v Apex-Pal Malaysia Sdn. Bhd. [2022] 2 LNS 1420, which was Industrial Court Award 1420 of 2022. We hope you enjoy reading it.
Introduction
In late November 2019, the Apex-Pal Malaysia Sdn. Bhd., which runs the chain of sushi restaurants known as “Sakae Sushi”, decided to employ a certain Chang Choon Hooi as their Finance Manager. An employment letter was issued to that effect, and Chang was appointed to his role officially. But, as readers know, by early 2020, things didn’t look so good for the economy, because of a little virus known as COVID, and companies began to experience a slowdown.
Company Requested Employees to Take Unpaid Leave
In February 2020, the company offered a VSS, which four employees accepted. A month later, the Prime Minister of Malaysia made an announcement regarding the lockdown, which was known in Malaysia as the “MCO”, or the “Movement Control Order”. Companies everywhere panicked, and Apex-Pal, otherwise known as Sakae Sushi, was no different. It requested its employees who were not required to work during the MCO, to voluntarily take unpaid leave. “Our business is doing poorly and we won’t be able to pay you”, they said, “so please take a break.”
It was in this scenario that Chang, the new Finance Manager in Sakae Sushi, refused to go along with the company’s request. Instead, he countered with an offer to receive 50% of his salary, because he wasn’t working during the MCO.
Termination
In early April 2020. the HR department contacted Chang. “It’s not you, it’s us. We have to let you go because you have become redundant“, they said. (Or something to that effect.) “But don’t worry, we’ll pay you RM6,300. Sounds good?”
“Nope”, said Chang, and promptly rejected both the termination and the money that was being offered to him.
By mid-April 2020, the company wrote back to Chang. Again. This time they enclosed the first letter, and said, “Well, you remember the earlier letter. You have become redundant, and we notice that you haven’t been performing well. And you’re still under probation. We’re sorry about this – but we will pay you.” (Or something to that effect.) “But don’t worry, we’ll pay you RM5,392.30. Sounds good?”
“Nope”, said Chang, for the second time, and this time, he brought his employer to court.
At The Court Case
Chang raised a number of points at the court case. First, when he was interviewed for the job, they never told him that they were facing financial difficulties, or that they were carrying out retrenchments. Second, there was no such redundancy and his job hadn’t, in actual fact, become redundant. Third, sure, the company said “redundant”, but they didn’t carry out the redundancy or retrenchment exercise. Fourth, if they really wanted to retrench him, they had failed to give him notice of termination and pay him compensation. Fifth, they never told him that his performance was poor. Sixth, they were trying to lay him off in bad faith, because he didn’t agree to take unpaid leave. Seventh, he was being unfairly dismissed.
The company attempted to reply Chang. It’s the COVID19 pandemic and the MCO order, which forced the company to carry out downsizing and retrenchment. The company’s points were, firstly, the company had been performing poorly since December 2019, and their outlets had been closed. Secondly, the company suffered a loss in the previous year, as its accounts showed. Thirdly, their restaurants had been severely affected by COVID! There were hardly any dine-in customers during that time. Fourth, Chang was a probationer, i.e. still under probation, and therefore, was apt to be let go under the “Last In, First Out” policy. Lastly, Chang’s job had indeed become redundant, because it would be combined with, and taken over, by Chang’s assistant Finance Manager.
Thus, the company was arguing that not only was their business badly impacted by COVID, but they also said that Chang was under probation, and it was OK to let him go under the LIFO principle.
Quick break: What is LIFO?
LIFO stands for “last in, first out”, and sounds like the kind of policy you have when you get into a crammed public bus. But it’s also the policy that says, the most junior employees get selected first, when jobs become redundant. The more senior ones get to keep their jobs until all the other junior jobs have become redundant. It’s not clear whether “LIFO” policies will ever lead to “FILO”, i.e. first in, last out, but if a senior manager has his mind set on keeping his job, there’s many things that they can do.
To be fair, employers are also likely to keep a core group of loyal and highly skilled staff during a downturn, because they want to retain a certain amount of skilled employees who can quickly pick up the pace once the downturn has passed, who can train junior employees in the skills needed to regain the lost momentum, and who can likely perform up to the boss’s expectations.
Anyway, back to our story…
What the court found: Retrenchment principles, redundancy, financial difficulty
First, the court considered the principles of retrenchment. Retrenchment has to strike a balance between the right of a company to run and reorganize its business, and the right of an employee to security of tenure. The principles of retrenchment are, to quote the court:
(a) It is the right of every employer to decide how he want to conduct or organize his business;
(b) It is also the right of every employer to reorganize or restructure his business or his workforce provided it is done in good faith;
(c) Selection of staffs to do the work or the size of the workforce is a management prerogative;
(d) Retrenchment can be carried out by an employer if a redundancy situation has arisen that is to say when there is a surplus of labour. However, the burden is on the employer to prove the redundancy;
(e) Notwithstanding that the choice of staffs for the work is a management’s prerogative, the discretion to retre nch staff must be exercised fairly and it is always subject to the scrutiny of the court;
(f) The retrenchment exercise must be bona fide and done in accordance with the established retrenchment principles such as those found in the Code of Conduct;
(g) The onus of proof is on the employer to prove that the retrenchment was done fairly and in good faith; and
(h) There must be good and strong reason for the Company to depart from the principles laid down in the Code of Conduct.
On the role of Chang, the claimant, the court found that Ms Kuan, Chang’s assistant, was already working in the company when he was onboarded in November 2019. Ms Kuan had already been working as an Assistant Finance Manager even before Chang became Finance Manager. Which meant, these were two separate roles. So what redundancy was there to speak of? Instead, the evidence showed that once Chang had been let go, the company immediately hired somebody else to fill the Finance Manager’s post. It was never redundant in the first place.
As to the company’s financial difficulties, the court found that Chang had been involved in the VSS scheme and the financial reorganizing i.e. retrenchment exercises. If he was the one helping with VSS and retrenchment, surely, his position was not in the targeted list; not at first, anyway.
On COVID and the MCO, the court found that the company’s trying to retrench Chang at the start of the pandemic, and the first MCO, was like “a ship captain throwing his crew members overboard in the face of an oncoming storm to keep enough speed to maneuver out of it, leaving them to fend for themselves in the ocean of uncertainty.”
Instead, according to the judge, “Employer has to show that it has taken positive steps ie, cost cutting measures to avert or minimize reductions of workforce and there was real necessity for the retrenchment in order to justify retrenchment on account of the COVID-19 pandemic, lest the retrenchment would be perceived as not done in good faith.”
But the company had tried calling for voluntary furlough – unpaid leave – among its staff. The managers pleaded with Chang; but Chang wanted his 50% salary. And shortly after that, the company said that Chang had become redundant.
The judge’s reasoning was simple: If the position had become redundant, why ask Chang to take unpaid leave?
And so it was, on that fateful day, the judge found that Chang’s retrenchment was not really a retrenchment; but an excuse to get rid of him, simply because he failed to follow orders to volunteer to take unpaid leave.
Conclusion – employee going on unpaid leave
Well, what’s the story here? Maybe it’s this: If you’re thinking of asking your employees to go on unpaid leave, you have to do so in good faith. If you want to let people go because they have become redundant, you have to take steps to try and minimize the harm caused. Your longest serving employees are often your best assets, but they can also give you something to remember, for a long long time.
This article has been prepared for general information purposes only. And, just maybe, for entertainment and education purposes as well. Please don’t forget to consult with a lawyer before making any decision, because this article does not serve as a substitute for proper legal advice.
Thanks for reading!