Productivity Linked Wage System
Kesatuan Kebangsaan Pekerja-Pekerja Perdangangan
vs.
Kumpulan O'Connor's (M) Sdn Bhd
Award No 1343 of 2009
Case Summary
This trade dispute is between the Kesatuan Kebangsaan Pekerja-Pekerja
Perdangangan (union) and Kumpulan O'Connor's (M) Sdn Bhd (company)
concerning the terms to be incorporated into the 6th Collective Agreement for
workmen coming within its scope.
Citation 1
Counsel submits that since the date of the Minister's reference is 5 December
2008, then going back six months, the effective date of the collective agreement
should not be earlier than 6 June 2008. The union's stand is that this collective
agreement should take effect immediately upon expiry of the previous CA Cog.
187/2004 which expired on 31 October 2006. This is not the first collective
agreement between the parties; they have had five previous consecutive
agreements. The company's letters dated 12 October 2006 and 20 April 2007
giving its proposals are captioned 'New Collective Agreement proposal 2006 2009' and nowhere in them is it stated that implementation of the collective
agreement should commence only upon resolvement of its terms. By implication
therefore the company had agreed that the CA take effect from the expiry of the
previous agreement Cog 187/2004. It cannot now come to the court and make
an issue of the effective date of the agreement by attempting to rely on s. 30(7)
of the Act. This will not arguer well for Industrial Harmony. Accordingly the court
holds that the retrospective effective date of the collective agreement should be
1 November 2006.
Citation 2
The current provision in Article 6(c) requires employees, whether technical or
non-technical, upon promotion, to undergo a trial period of not exceeding three
months. While agreeing that this trial period remain at three months for nontechnical staff the company proposes to insert a new clause i.e. Article 6(c) (ii),
requiring a trial period of 6 months for promoted technical staff. the company
submits that this proposed amendment will be fairer and more equitable to
technical staff promoted as otherwise, based on the current provision the
company might have to either revert him to his original position after three
months should it not be fully satisfied with such staff's performance in his
new/promoted position, or extend his trial period for a further three months. The
union submits that the current provision has served the parties well and that
there is nothing on record to say that the 3 month trial period is inadequate. It
also says that the proposed new provision could be subject to abuse and is not
equitable. Since the matter concerns the promotion of employees who have
already performed and have been deemed suitable for promotion by the
company based on past performance and appraisals, a 3-month evaluation
period would be fair. Being an engineering firm the company relies heavily on
the competency of technical staff. As evident in Appendix 1 of the Comparison
Table, where both parties have proposed a much higher salary for the technical
staff entails a much higher responsibility than that of the clerical staff. It is
logical therefore that these technical staff will need a longer trial period as
compared with the clerical staff. The current provision, to the court's mind, is too
rigid, giving three months only for trial failing which the employee reverts back
to his previous position i.e. is demoted. Therefore it is only appropriate that the
company's proposal be adopted, and the court so holds.
Citation 3
Currently the company's employees are eligible for medical treatment by a
medical practitioner. However, the company seeks to cap such benefits at RM350
for each employee. This capping applies to out-patient treatment, but not
hospitalisation to which the employees are also entitled. The rationale for such
capping, so the company says, is that it is 'only appropriate and prudent for
purposes of budgeting and staff expense management'. The court is unable to
understand this explanation. The union submits that there has been no such
capping before and that a caring employer should take into account the
employees' medical wellbeing so as not to jeopardize productivity. There is no
evidence before the court that the absence of such capping might lead to abuse.
Furthermore the financial capacity of the company to meet such medical
expenses is not in issue. The court therefore rules against the company's
proposal to introduce such capping. If the company has a genuine need to
monitor (or 'manage' as it puts it) this aspect of staff expense it should consider
making it a requirement that employees seek treatment at its panel clinics and
not go to non-panel clinics without prior special written permission.
Citation 4
By the existing system bonus was computed and paid based on one factor i.e.
the company's Return on Average Working Capital (RAWC) for the financial year
ending 30th September. The flaw in this system is that it meant paying bonus to
all staff without regard to individual performance and achievement of its business
objective. The company in seeking to rectify this weakness proposes to depart
from the existing system and to adopt a Productivity Linked Wage System
(PLWS) and, the court is pleased to note, the union is amenable to this
introduction of PLWS. The Government's commitment towards the
implementation of PLWS is embodied in its policy statements contained in the
Third Outline Perspective Plan [2001-2010]. The Eighth Malaysia Plan (20012005) re-emphasised this policy and the need to establish a closer link between
wages and productivity. The industrial court, too, has hearkened and rallied to
this call to move forward with the times. For example, in Prestige Ceramics Sdn
Bhd Vs Non-Metallic Mineral Products Manufacturing Employee's Union [2004] 1
ILR 1177 (Award No 211 of 2004) the court stated: Having considered again the
requirements of s 30(4) and s 30(5) of the Act and circumstances of the case,
we find that the company's proposal to replace the annual increments with a
system of paying incentives which is linked to the company's performance and
productivity is fair and equitable and we endorse it. This system will see the
employees rewarded when the performance of the company warrants it in that
there is increase in productivity. The company is spared the extra expense in
terms of annual increment when there is no value added to the employee's
performance which was once thought to be the basis of annual increments. The
introduction of this system will further improve productivity and make the
country's products more competitive. Making our products more competitive will
ensure our survival in the face of competition from our neighbours. This is
definitely the order of the future in light of globalisation now taking place. For
these reasons we allow the company's proposal to introduce its productivity
linked wage system.
Decision
Held in favour of the union on the issues of the commencement date, annual
leave, medical benefits, and staff advances and in favour of the company on the
issue of promotion, bonus, salary structure and annual increments. Having thus
made our decisions on the disputed articles we give the parties one month to
prepare their collective agreement incorporating the articles that were either not
in dispute or which were agreed to during the hearing together with the
decisions of this court on the disputed articles.
Performance Issues
The Industrial Court Case Between:
The Pan Pacific Resort Pangkor
Vs
Raja Letchmi G Sundra Rajoo
(Industrial Court Award No. 989 of 2008)
CASE OVERVIEW
The claimant had been in the hotel's employment for 15 years until she was
terminated in her capacity as Rooms Division Manager on grounds of her alleged
poor performance. The claimant's problems with the hotel started when the new
General Manager was appointed on 1 April 2000.
The GM of the hotel observed that the claimant's performance was not up to the
mark within the 1st week of him joining. He then had discussions with the
claimant on her alleged shortcomings. Subsequently, he also testified that he
assisted, guided and encouraged her on the standards expected out of her in her
capacity as Rooms Division Manager. In addition, he also issued two memos to
the claimant covering various areas of weaknesses. When she failed to show
improvement, he issued her with three further letters pertaining to her
unsatisfactory performance - with the final letter mentioning that severe action
would be taken if she continued to not improve.
The claimant contended that she replied to all the GM's memos and letters
wherein she explained all the reasons surrounding the allegations of nonperformance raised.
Ultimately, the claimant was dismissed on 21 April, 2001, one year after the new
GM's appointment. She then claimed unfair dismissal. The core consideration
before the Court was to determine whether the company had been fair in its
approach to dismissing the claimant.
WHAT THE INDUSTRIAL COURT HELD
The Industrial Court held in favour of the CLAIMANT, finding that the attitude
exhibited by the hotel’s GM toward the claimant was one that border-lined on
nit-picking. The court further found that the GM’s behaviour toward her showed
that he was more intent on demoralising and running her down instead of
getting her to improve. In basing its decision that the company had unfairly
treated her, the court cited the following:
“I question the manner COW1 as general manager managed and ran
the hotel. By perusing and assessing objectively what he wrote to the
claimant, it was plain to me that instead of motivating and finding
comprehensive ways to work and meet common objectives through
efficient teamwork, COW1 chose to demoralise and run down the
claimant alone. There was no evidence that COW1 held any regular
meeting or powwow with all the managers (the management team of
which he was the head) to address and resolve operational problems
and hitches that would invariably arise from time to time. Instead he
chose to hold the claimant solely responsible and accountable.
There was also evidence that COW1 chose not to give part of the credit
to the claimant for the success of the DRB-Hicom CEO conference
2001. Page 12 CLB (claimant's bundle of documents) is a letter dated
27 March 2001 from the Group Director of DRB-Hicom thanking
COW1's team for their support and assistance in the preparation and
success of the conference. There was obvious guest satisfaction here
which underscored the importance of dedicated teamwork. However
COW1 chose to nit-pick by his letter to the claimant dated the same on
p. 52 COB. From the tone and the nature of his complaints, it was
explicit that COW1 did not look at the overall picture of success but
instead preferred to go on a path of pedantic fault-finding against the
claimant for reasons only best known to himself."
After finding that the claimant had indeed been unfairly dismissed, the court
made an interesting decision by finding that the claimant should be reinstated in
her old position – despite her being employed in a management capacity. The
court cited the following in reference to its decision to reinstate her:
"After taking into account all the relevant considerations and
circumstances posed to the court by both parties in their submissions, I
opine that there is no adverse reason against reinstating the claimant.
The breakdown in relationship was not so much between the claimant
and the hotel. The irretrievable breakdown was rather between the
claimant and COW1 who is now no longer the general manager of the
hotel. I am inclined to agree with the claimant who submitted that her
predicament started after COW1 took over as the general manager.
Page 1 CLB written by the relief general manager Chris Green just
before COW1 took over as general manager bore testimony to this. It
has also not been established by the hotel that the claimant was
gainfully employed elsewhere after her dismissal. Neither was there
any admission by the claimant on this. At the hearing, she declared
herself as a housewife by way of designation."
HOW WE CAN BENEFIT FROM THIS CASE
It’s Not About Warning Letters
Some companies are still mired in this ‘cold war’ approach toward managing poor
performance. This adversarial approach towards managing a poor performer
often leads to:
a) Managers choosing to stay away from approaching this matter altogether;
or
b) Managers thinking that managing performance is all about issuing the
requisite number of warning letters.
A new approach needs to be adopted in companies. Managers need to be taught
on how to correctly manage their subordinates where they detect a ‘slip’ in
performance.
What The Industrial Process Wants
Assume your organisation has a poor performer whom it ultimately dismisses
from service. The employee takes the matter thru the industrial relations process
which ultimately ends up in Industrial Court. In court, the ‘burden of proof’ or
‘burden of proving their case first’ always reside with the organisation – so your
company will now have to show proof that it was fair in coming to its decision to
dismiss the employee. What do you think the courts look for?
Being a court of equity, the Industrial Court is never concerned about the
number of warning letters you have issued to the employee – as the case above
shows. This to the courts is merely a technicality.
Rather, the Industrial Court is concerned with the ‘substance’ behind your
company’s decision to dismiss and these are the 3 questions it will ask:
1. Evidence that performance targets were clearly established and
communicated to the employee;
2. Evidence that your company provided the employee with
guidance/training to achieve these targets; and
3. Evidence that a reasonable time was given for the employee to
improve.
Share this update with your senior managers. They need to be aware that
managing performance isn’t about issuing the requisite number of warning
letters. Rather, it’s about managing proactively while showing fairness to the
employee.
Fixed Term Contracts
The Industrial Court Case Featuring:
Celcom (Malaysia) Berhad
Vs
Chin Chun Yean
(Award No. 1275 of 2008)
OVERVIEW
This update addresses the issue of:
“Whether a company has the right to prematurely terminate a fixed-term
contract?”
The claimant was employed by Celcom as its Executive Vice President of
Customer Facing Units in January 2002 on a fixed-term contract of five years. He
was paid a monthly salary of RM 50,000 per month plus a housing allowance of
RM 5,000 per month. In addition, he was provided with benefits such as leave
passage, company car, reimbursements of up to RM 30K per year as well as
being entitled to contractual and performance bonus. The claimant's fixed-term
contract also contained a clause that provided for a rate of payment for
compensation in the event that his contract was terminated prematurely.
In early 2003, Celcom merged with TM Touch. In September that year, the new
CEO of the company Dato Ramli Abbas called the claimant for a discussion to
review his contract terms - specifically to reduce the claimant's benefit
entitlements. The claimant refused this review, stating that the motivating factor
behind his move to Celcom (from his prior position as Director of Astro and
Maxis) was the financial incentives offered.
On October 27, 2003, the respondent terminated the claimant's contract by
exercising its right under clause 3 item 8 of the claimant's contract of
employment. It also paid the claimant a total compensation package of more
than RM 5.5 million (RM 5, 588, 207).
The claimant then claimed that his dismissal had been unfair and the core
considerations before the court were:
a)
to determine whether the termination clause provided in the contract of
employment provided Celcom with the right to terminate the claimant's
contract prematurely; and if so;
b) whether the formula for computing the claimant's salary (for purposes of
determining compensation) should include his allowances and incentive
bonus.
WHAT THE COURT HELD
The Industrial Court found in favour of CELCOM, holding that as the contract of
employment contained a clause that allowed Celcom to terminate (with
compensation) the claimant’s service prior to the expiry of the 5 year term, it had
the right to do so. In basing its decision, the court cited the following:
"The claimant's notice in the instant case had not been merely by due
notice but had been coupled with the specific provision of the
compensation that would be payable to him should such an event
occur. The cases cited by the claimant in his submission had been
distinguishable and inapplicable as they had related to terminations by
contractual notice, where there had not been any agreement on
compensation payable if termination were to take place. The claimant
had himself endorsed clause 3 which had set out compensation as
being a key condition and it had been put in place by the respondent
after months of negotiation between the parties."
Having found that Celcom did have that right to prematurely terminate the
contract, the court then addressed the issue of ascertaining whether the claimant
was entitled to the additional RM 3 million in compensation that he contended
was due to him. It accordingly cited the following in rejecting the claimant’s
contention that his salary calculation should include his allowances and incentive
bonus:
"For the 2 months contractual bonus, the claimant had been paid the pro-rated
amount. The housing allowance had been a separate clause in the contract of
employment and had not been under salary. The leave passage clause had only
talked of reimbursement. COW1 had asserted that the housing allowance, leave
passage and incentive bonus had all been allowances and had not been
considered to have been included as salary remuneration. Thus the respondent
in exercising its contractual right under clause 3 item 8 to terminate the
employment contract prematurely, had complied with the payment of
compensation accordingly. The court rejected the claimant's computation of
compensation as per CLB1."
HOW WE CAN BENEFIT FROM THIS CASE
1) The Employer’s Right to Terminate a Fixed-Term Contract Prematurely
The judge (chairman) in this case made it clear that an employer will be
able to prematurely terminate a fixed-term contract where the contract
contains a ‘compensation clause’ that specifically allows for premature
termination of the contract. This compensation clause must be separate
from the termination notice clause. This concept of the right to premature
termination of fixed-term contracts is best summed up by the following
statement (cited by the court):
"Although the claimant's termination was by contractual notice
of 3 months, compensation under the agreed mode of payment
within the varied and amended cl3 item 8 above was allegedly
paid by the respondent. Equity is equality. The respondent has
the contractual right under the contract of employment to
terminate prematurely and the claimant similarly must have the
contractual right to be paid the agreed compensation as agreed
upon in the same contract."
2) Computation of salary need not include allowances
The judge in determining the claimant’s compensation structure found
that the computation of his salary need not factor in his housing
allowance of RM5K per month. Despite the fact that the housing
allowance was fixed, the court rules that as the housing allowance was
provided for in a separate clause (and not under salary), Celcom was
entitled to exclude it in computing his compensation payable
Domestic Inquiry
YEO HIAP SENG TRADING SDN BHD
Versus
LIM LEE CHOON
(HIGH COURT, MELAKA) No:MT1-16-1-2003
CASE PREVIEW
This update answers the following two questions:
1)
Is a company still required to conduct the domestic inquiry after the
employee has plead guilty?, and
2)
Is poor performance a misconduct requiring a domestic inquiry process
prior to dismissal?
In this featured case, Lim Chee Choon (the employee) was employed by Yeo
Hiap Seng Trading as its salesperson when it dismissed him on grounds that his
performance was below expectations, evidenced by him achieving only 45% and
61% of his sales targets for the months of July and August, 2002 respectively.
Prior to being terminated, Lim had served his employer for more than 23 years.
However, instead of taking his complaint to the IR process, Lim took his matter
before the Labour Department on grounds that he was not paid his termination
notice and benefits. The Labour Officer found in his favour and awarded Lim a
sum of RM 2,410.93 for payment in lieu of notice of termination and a further
RM 23, 074.62 as termination benefits. In basing its decision, the Labour Office
also found that Yeo Hiap Seng was wrong to terminate Lim’s services without
according him with his due-process right for a domestic inquiry.
Dissatisfied, Yeo Hiap Seng appealed this decision, contending that it was legally
entitled to terminate Lim without a domestic inquiry.
WHAT THE HIGH COURT HELD
The High Court affirmed the Labour officers ruling. On the issue of the
employee’s poor performance, the court found that the company had failed to
prove that this amounted to a ‘misconduct’. It accordingly quoted the following:
“The facts in those cases cited for the employer are substantially
different from those in the instant appeal, as the issue of misconduct
was never raised as a ground in the employer's letter dated 30
September 2002, purportedly terminating the service of the employee
as a salesman. Indeed, the focus of that letter is on the employee's
need to demonstrate significant improvement. That being the case, it is
difficult for the labour officer or for me in this appeal to come to a
conclusion that there is a breach of legal duty by the employee to
constitute misconduct.
Even assuming for a moment that the employer has established
misconduct s 14(1)(a) requires the employer to comply with the
procedural requirement of due inquiry in the following words.
14. Termination of contract for special reasons
(1) An employer may, on grounds of misconduct inconsistent with the
fulfilment of the express or implied conditions of his service, after due
inquiry: a) dismiss without notice to the employee.
By way of illustration, where the service of an employee with a
monthly salary of RM600 was terminated without any notice, Wan
Adnan J (later PCA) held that the employer had violated s 14(1), as an
employee within the meaning of the Act could only be dismissed after
due inquiry to ascertain the ground of misconduct.”
The court then decided on the issue of whether a domestic inquiry should have
been conducted. In deciding on this issue, it accordingly cited as follows:
It is to be observed that due inquiry may be conducted by way of a
domestic inquiry, but the Act does not provide for any rules to regulate
the procedure to be followed by a presiding officer.
For the purposes of conducting a due inquiry under s 14(1), I am of the
view that it is salutary to follow the guidelines set out by the Industrial
Court on 26 September 1975 in KJJ Cleetus v Unipamol (Malaya) Sdn
Bhd Kluang (Case No 74 of 1974) as follows:
a) the inquiry is to be instituted as early as possible after suspension of
the Complainant,
b) the complainant is to be given particulars of the misconduct,
preferably in writing, and a reasonable time be given before the inquiry
to enable him to prepare his case,
c) Wherever applicable, the Complainant is to be accompanied by his
union or Committee representative, if any, at the Inquiry,
d) the inquiry is to be conducted, as far as possible, by such Officer/s
as not directly connected with the investigation of the misconduct so
as to give the hearing impartiality,
e) examination of relevant witnesses is to be allowed at the reasonable
discretion of the officer in charge of the inquiry.
f) Notes in the form of Question and Answers and the final decision are
to be recorded to show that the Inquiry was proper and the decision
arrived at was fair.
Finally, the court addressed the issue of whether the requirements for a ‘due
inquiry’ mean that the inquiry should still proceed after an employee has pleaded
guilty. In finding in the affirmative, the court quoted as follows:
“For the purposes of s 14, 'due inquiry' includes the right to make
representations against the punishment proposed as a result of
adverse findings by a domestic body. An employee should not only
have the opportunity to present arguments on 'liability' but also in
mitigation of penalty. More particularly, any discretion as to
punishment should preclude relaxation of the requirement of a fair
hearing, which includes being afforded the opportunity to make a plea
in mitigation, following Siggs and Chapman (Contractors) Ltd v Knight
[1984] 13 ILR 83.
On my part, I would add that the requirement for a due inquiry under s
14(1)(a) is a statutory expression of the first fundamental principle of
the common law rules of natural justice i.e. audi alteram partem (hear
the other side) or no man shall be condemned unheard. A breach of
this fundamental rule would vitiate a judicial or quasi judicial decision.
This principle is so trite and settled that there is hardly any need to cite
any authority in support thereof.”
HOW WE CAN BENEFIT FROM THIS CASE
1.
CONDUCT THE INQUIRY EVEN WHERE THE EMPLOYEE HAS PLEADED
GUILTY
Watch any law drama on ASTRO and you’ll notice that the reason
someone pleads guilty is in hope that they be given a reduced sentence.
The same rationale applies with domestic inquiries where an employee
who pleads guilty usually does so in hope that he/she will get a mitigation
in sentence, i.e. not be dismissed.
Therefore, your organisation still needs to convene the inquiry despite the
employee already pleading guilty in order to allow the employee to
present:
a)
His/her arguments, and
b)
Any mitigation in punishment.
We’ve seen a lot of cases end up in court as companies choose the shortcut approach of immediately ending the DI after the employee plead
guilty.
Remember, a DI is conducted not just for purposes of establishing guilt,
but to determine the degree of guilt, i.e. should this person be dismissed.
2.
A DUE INQUIRY AND DOMESTIC INQUIRY ARE DIFFERENT
The law specifies that where a misconduct has occurred, a ‘due inquiry’
should be conducted in giving the employee a chance to explain
themselves. This requirement of ‘due inquiry’ doesn’t equal the need for a
domestic inquiry (3 man panel, prosecutor, investigator, witnesses, etc).
This means that in some cases your organisation is free to choose less
cumbersome processes in meeting this requirement of ‘due inquiry.’
Given the time, cost and complexity associated with a DI, many
companies look for options to how they can better manage this process.
One such way is to have separate categories of misconducts where the
more serious ones will lead to a DI while the less serious ones require
only a show cause inquiry (a two person panel without any prosecutor,
investigator, etc).
For instance, your organisation could adopt an SOP where misconducts
such as chronic absenteeism & late-coming, sleeping on the job or clear
cases of sabotage (caught on CCTV for example) are handled via a show
cause inquiry whereas those that require witnesses testimony and
contentious evidence to be handled via a domestic inquiry.
Point here is ‘due inquiry’ doesn’t mean a DI needs to be held for every
misconduct.
3.
HAVE A TRAINED POOL OF PANEL MEMBERS READY
Some leading companies in Malaysia today, apparently fed-up with
instituting DI after DI, only to have their dismissal decision later
overturned in court, have opted for a more streamlined approach to this
process. They adopt a guideline where if a misconduct only ‘requires noncontentious evidence and not more than one witness to testify’, a show
cause inquiry will suffice. A DI, on the other hand, is convened only when
a number of witnesses and potentially ‘contentious’ evidence will need to
be presented.
These companies also have a ‘dedicated’ panel trained on how to convene
these show cause inquiries whereas a separate pool of potential panel
members are identified for situations requiring a DI.
This decision to separate ‘show cause inquiry’ from domestic inquiry
situations is saving these companies time, effort and costs, resulting in
their HR function managing misconducts more efficiently.
Retrenchment/Redundancy
The Industrial Court Case Between:
Mat Desa Saad & Anor
versus
Langkawi Ferry Services Sdn Bhd
(Industrial Court Award No. 942 of 2008)
CASE OVERVIEW
A company has the right to organise its operations. This right is also known as a
management prerogative and includes the right to transfer and retrench.
However, this right is not unfettered in the sense that the company still needs to
prove that the reasons behind its decision to transfer/retrench are genuine. If an
employee later claims that the company’s decision to transfer or retrench him
was done in bad faith, how then does our Industrial Court determine the
‘genuineness’ behind a company’s reorganisation initiative?
This week’s update addresses this issue and centres on the retrenchment of two
ferry drivers from Langkawi Ferry Services. Here, the 2 claimants were employed
as the company's Engine Drivers of its Kenangan 1 and Impian 2 ferries
respectively. When Kenangan 1 ceased operations, the 1st claimant was
transferred temporarily to another ferry called Alaf-6. The same situation
occurred with the 2nd claimant when Impian 2 ceased operations resulting in his
temporary transfer to Impian 3.
As both Alaf-6 and Impian 3 had their own dedicated drivers, the company
decided to retrench the claimants. The claimants were also not paid any
retrenchment benefits on the basis that as they had entered into crew
agreements with the company under Part III of the Merchant Shipping Ordinance
Act 1952, they were not covered under the scope of the Employment Act.
The claimants henceforth claimed unfair dismissal and the main consideration
before the court was to determine the fairness of the company's decision to
retrench them.
WHAT THE INDUSTRIAL COURT HELD
The Industrial Court held in favour of the claimants, finding that the company’s
decision to retrench had not been motivated in good faith. In finding that the
company did not have any justifiable reasons to retrench them, the court
questioned why the company did not show its P&L statements and accordingly
cited
the
following:
"The court is of the view that if the profit and loss account of the
company had been tendered in court it will show the true financial
position of the company whether the financial difficulties are due to
the business losses, cash flow problems or tight liquidity. The court
notes here there was no explanation by the company for the failure to
produce the said profit and loss account. Thus, in the absence of the
said account this court has no alternative but to draw an adverse
inference against the company under section 114(g) of the Evidence
Act 1950. Hence, it would appear the company was not in a real
financial hardship when it decided to terminate the claimants. Counsel
for the company had also submitted that the company was facing
increasing costs for material and maintenance coupled with the
reduction in the demand for its ferry services. Again, the court is of the
view that due consideration can be given if the company can produce
documentary proof to back-up matters affecting the company's
profits."
The court also took the company to task for not adhering to the Code of
Conduct for Industrial Harmony before it retrenched the claimants
where it cited the following:
"In the instant case, it can be seen that the company had not taken any
positive steps to avert or minimise reduction of workforce such as pay
cuts and reduction in working hours. The claimants also had not been
consulted or given sufficient notice of their pending retrenchment by
the company. Although the claimants were offered alternative
positions but the jobs was in Pulau Tioman goes to show that the
company was adamant in retrenching those who's job functions the
company felt it could do away with. All these measures are listed in the
code of conduct of Industrial Harmony. By not taking heed of these
listed measures the reasonableness of the company's action in
retrenching the claimant was compromised."
HOW WE CAN BENEFIT FROM THIS CASE
1)
Prepare A ‘Retrenchment Justification Report’
Instead of waiting until the date that you actually have to start
retrenching employees, prepare for this possibility by ensuring that your
financial papers are in order ahead of time.
You needn’t be experiencing losses before you can retrench but the
important thing here is that you are able to show a downward trend, be it
in terms of number of customer acquisitions, reduction in market value of
the product/service offered or an outright drop in revenue.
In addition, your ‘retrenchment justification report’ must show that your
company explored other avenues prior to retrenching such as attempting
other business channels, reorganising your product lines, etc.
The important thing here is to paint a human picture of your organisation.
2)
Be Careful with the Code of Conduct for Industrial Harmony
If you’ve been following the news, you’d know that our government policy
is to discourage a company from retrenching unless it is a last resort. One
way they have been enforcing this policy of discouraging retrenchments is
to push adherence to the Code of Conduct for Industrial Harmony.
This code basically recommends that prior to retrenching, the company
should have attempted other measures such a reducing its work hours,
enforcing pay-cuts and offering VSS. This further puts strain on a
company’s flexibility to retrench.
3)
Implement an “Employee Performance Improvement’ System
Since the law is discouraging retrenchments, logic dictates that companies
should pursue initiatives that give it flexibility to drive ‘employee
performance.’ One such mechanism is a ‘performance improvement
system’ that provides companies with another means of reducing
organisational fat by getting rid of ‘under-performing’ staff in a legally
compliant manner.
Forced Vs Voluntary Resignation
DATUK DR CHEW HAN CHING
Vs
PUTERA CAPITAL BERHAD
(Industrial Court Award No. 894 0f 2009)
CASE PREVIEW
This update addresses the issue of whether an organisation has the right to get
its employees to sign an undated resignation letter when they newly join in
giving it the flexibility to terminate the employment relationship anytime it
chooses to do so.
In the instant case, the claimant (Datuk Dr Chew) joined the company (Putera
Capital) on April 1, 2004 as its Executive Director on a 3 year contract. In joining
them, Datuk Dr Chew voluntarily signed and deposited an undated letter of
resignation with the company.
On 31 December 2004, the company announced the claimant’s resignation
(without his knowledge) on the Bursa Malaysia website. The claimant then tried
to get the company to nullify and retract its announcement of his resignation. He
was however unsuccessful, leading him to contend that his resignation had been
induced and had not been voluntary.
The core consideration before the court was to determine whether the claimant
had resigned voluntarily or was forced to do so.
WHAT THE INDUSTRIAL COURT HELD
The court held in favour of the COMPANY, finding that the claimant had been
unable to provide the court with evidence that his resignation had been forced.
The court cited the following in dismissing his application:
Citation
“It was crystal clear that there was not an iota of evidence to display
that the claimant was required to resign or else the company would
dismiss him. In fact the letter of resignation signed by the claimant
stated categorically: ‘Kindly do the needful to effect my resignation
soonest possible’.
From the evidence adduced in this court, it was clear that the claimant
had signed the undated resignation letter with full knowledge and
understanding of the contents and effect of the said letter, bearing in
mind that the claimant was an Executive Director of a public listed
company and was 52 years old at the time when the undated letter of
resignation was signed. The claimant agreed in cross-examination
between September 2004 and 30 December 2004 he did not send any
letter or notice that he wanted to withdraw the resignation letter.
Thus, by signing and depositing the said undated letter of resignation
the claimant had by his conduct and intention voluntarily allowed the
company to effect his resignation at the appropriate time.”
HOW CAN WE BENEFIT FROM THIS CASE
1)
BURDEN OF PROOF IS ON THE EMPLOYEE IN FORCED RESIGNATION
CASES
Where an employee contends that his or her resignation has been coerced,
he/she shoulders the burden of proving it – not the company. This means
that the employee would have to show the court proof that he/she was
forced to sign or submit the resignation letter.
2)
AN ORGANISSATION CAN GET AN EMPLOYEE TO SIGN AN UNDATED
RESIGNATION LETTER
This case suggests that an organisation can get an employee to send in
his/her undated resignation letter, giving it the option to use the letter
anytime it wishes to end the employment relationship.
Naturally, an organisation considering implementing such a policy will need to
balance having this option with the fact that employees (forced to sign such
letters as a precondition of employment) are likely to be less loyal to their
employers as they feel less secure about their jobs.
Datuk Dr Chew Han Ching
vs.
Putera Capital Berhad
Award No 894 of 2009
Case Summary
The claimant vide a contract of employment, had been appointed the Executive
Director of the company for a term of 3 years expiring on 31 March 2007. In
furtherance thereto, the claimant voluntarily signed and deposited an undated
letter of resignation with the company. An announcement of the claimant's
resignation was made in the Bursa Malaysia website on 31 December 2004
without the claimant’s knowledge. The claimant sought to retract and nullify this
announcement of his resignation to no avail. The claimant contended that the
company had constructively dismissed him. The company on the other hand
contended that the claimant had voluntarily resigned. The sole issue that arose
for determination before this Court was whether the claimant's resignation from
his services had been a forced or a voluntary resignation.
Citation 1
The statement of Agreed Facts dated 30 April 2007 filed by both counsel for
claimant and respondent are as follows: i) the claimant, vide a contract of
employment dated 2 April 2004, was appointed an Executive Director for a fixed
term of 3 years ending 31 March 2007; ii) an announcement on the claimant's
resignation was made in the Bursa Malaysia website on 31 December 2004; iii) a
signed undated letter of resignation was deposited by the claimant to the
company.
Citation 2
Dear Sirs Re: Notice to nullify the undated letter of resignation I, Dr Chew Han
Ching, as the Executive Director of Putera Capital Berhad hereby write to confirm
that I have no intention to tender my resignation as the Executive Director of
Putera Capital Berhad and the undated letter of resignation given by me to the
company, as requested by the company is merely meant to be adopted in the
event if I wish to tender my resignation. In view that I have no intention to
tender my resignation at all, please be informed that I hereby declare the
aforesaid undated letter of resignation null and void an shall not be any event be
adopted or used without my express written consent. I shall hold the company
full liable for all loss and damages incurred for any unauthorised use of the
aforesaid undated letter of resignation.
Citation 3
The issue of forced resignation being a material fact was not pleaded by the
claimant in the Statement of Case. The claimant instead pleaded constructive
dismissal when the resignation was announced by the company without the
claimant's consent. It is trite law that a party is bound by its pleadings. This
court must scrutinise the pleading and identify the issues, take evidence, hear
the parties arguments and finally pronounce its judgement having strict regards
to the issues. See R Ramachandran vs. Industrial Court of Malaysia & Anor
(1997) 1 CLJ 147 at p. 162 Federal Court. It was crystal clear that there was not
an iota of evidence to display that the claimant was required to resign or else the
company would dismiss him. In fact the letter of resignation signed by the
claimant stated categorically: 'Kindly do the needful to effect my resignation
soonest possible'. From the evidence adduced in this court, it was clear that the
claimant had signed the undated resignation letter with full knowledge and
understanding of the contents and effect of the said letter, bearing in mind that
the claimant was an Executive Director of a public listed company and was 52
years old at the time when the undated letter of resignation was signed. The
claimant agreed in cross examination between September 2004 and 30
December 2004 he did not send any letter or notice that he wanted to withdraw
the resignation letter. Thus, by signing and depositing the said undated letter of
resignation the claimant had by his conduct and intention voluntarily allowed the
company to effect his resignation at the appropriate time.
Citation 4
The claimant contended that the company had failed to obtain his consent prior
to making the Bursa Malaysia announcement. The claimant had no basis for
stating that the company has a legal obligation to obtain the consent before
effecting his resignation. Nothing in the listing requirements nor the company's
memorandum and articles of association or any legal requirement that imposes a
legal obligation on the company to obtain the claimant's consent before effecting
his resignation. The company submitted that this court is not the proper forum to
claim for non payment of bonus, annual leave passage and claims accrued to the
claimant pursuant to the Contract of Appointment. The claimant submitted that
this court has the jurisdiction to make the award for the claims for non payment
of bonus, annual leave passage and claims based on s 30(6) Industrial Relations
Act 1967 that provides: 'in making its award, the court shall not be restricted to
the specific relief claimed by the parties in the course of the trade dispute or in
the matter of the reference to is under s 20(3) but may include in the award any
matter or thing which it thinks necessary or expedient for the purpose of settling
the trade dispute or the reference to it under s. 20 (3).
Decision
The claimant’s case was dismissed as he had voluntarily tendered his resignation
and failed to prove he had been constructively dismissed by the company.