THE Covid-19 pandemic has hit the global economy hard as most countries, including Malaysia, went into some form of lockdown for several weeks in order to stop the spread of the disease. Businesses worldwide have been affected by the restrictions on human activities and many have been forced to lay off staff.
Undeniably, retrenchment of workers on grounds of redundancy is a difficult area of labour law, as it raises considerations of economic efficiency, industrial autonomy and social justice.
It would mean workers losing their jobs even though they have not done any act justifying dismissal. But if the employer carries on as usual, the business will incur losses, which may lead to insolvency, bankruptcy and winding up of the company. In this situation, both the employer and worker will lose their livelihoods.
The viable option is to sacrifice some workers by retrenching them, thereby saving the business and jobs. It is trite law that as long as managerial power to retrench workers is exercised on valid commercial reasons, the decision of the employer will be immune from examination even by the Industrial Court. However, whether or not the retrenchment exercise was justifiable is a question of fact and of degree, depending upon the facts and circumstances of each case.
What is important is that whenever a redundancy situation exists that necessitates retrenchment of workers, the employer must first consider various options to avert it, such as by freezing new hiring, eliminating temporary labour, reducing working hours and/or wages, transfer of workers to another department or branch and exploring alternative employment in the organisation, including redeployment.
If retrenchment is still inevitable after all of the above, the employer should consider offering a voluntary separation scheme or paying retrenchment compensation to the affected workers, which is primarily intended to cushion them during the difficult time after loss of employment.
The established principles and procedures dealing with retrenchment are set out in the Code of Conduct for Industrial Harmony and are consonant with the current ethos of corporate social responsibility.
Further, by virtue of Section 30(5) of the Industrial Relations Act 1967, the Industrial Court is empowered to take these factors into consideration in determining the justifiability of the retrenchment exercise.
In short, it is incumbent upon the employer to prove that there was a redundancy situation in the organisation leading to a retrenchment exercise, and the consequential retrenchment was made in compliance with accepted standards of procedure.
PROF DATUK SERI DR ASHGAR ALI ALI MOHAMED
International Islamic University Malaysia
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