Just cause for retrenchment

THE question of whether there is any law that specifically requires an employer to provide a written explanation to workers of the reasons for their retrenchment has once again surfaced.

The Employment Act and the Employment Termination and LayOff Benefits Regulations are silent on the requirement to provide an explanation of the reasons for retrenchment to the affected workers.

However, numerous awards in the Industrial Court indicate that industrial jurisprudence has long recognised the need to treat employment contracts differently from other ordinary contracts.

In fact, the law is settled in that there is no distinction between a unilateral termination of a contract of employment and a dismissal, as either must be with just cause or excuse.

In other words, the employer must justify his action and offer reasons showing, among others, that the retrenchment exercise was carried out with just cause and excuse.

It is noteworthy that the courts have recognised a person’s right to livelihood. Article 5 (1) of the Federal Constitution has been given a broader interpretation to include the right to quality of life.

This article has to be translated into the practical assurance that no employer can dismiss or even contractually terminate the service of his employee save with just cause and excuse.

Further, the Industrial Relations Act was enacted to elevate the status of employees by regulating working conditions and providing them with various benefits apart from prohibiting arbitrary dismissal from employment.

The Act provides that a workman cannot be dismissed save with just cause and excuse. It thus requires the substantive justification and procedural fairness for a valid dismissal.

This is also in line with the International Labour Conference’s Convention that requires justification for termination from employ- ment. It provides that an employee cannot be terminated unless there is valid reason for such termination, and this includes the operational requirement of the undertaking, establishment or service.

It further provides that when an employer contemplates the introduction of major changes in production, programme, organisation, structure or technology that are likely to entail terminations, the employer should consult the workers concerned or their representatives as early as possible.

The emphasis herein is that the employer must ensure that any retrenchment exercise in an organisation is carried out in a fair and justifiable manner and is not capricious or with motives of victimisation or unfair labour practice.

Fairness in the retrenchment exercise would include, inter alia, consultation and prior warning of the impending retrenchment. The above is basically to encounter the immediate hardships as a consequence of retrenchment.

Therefore, it is incumbent upon the employer to prove that there was a situation of redundancy in the organisation leading to a retrenchment exercise and that the consequential retrenchment was made in compliance with the accepted standards or procedures, including giving reasons for the retrenchment in the organisation.

When a dispute is referred to the Industrial Court, the Court has to determine whether the consequent retrenchment was in compliance with accepted norms and practices.

As long as the retrenchment was carried out in accordance with the accepted practice, the exercise would not be disturbed.

However, where there was no warning or that the worker was not consulted prior to the retrenchment, the court may rule that the retrenchment was without just cause or excuse.

ASHGAR ALI ALI MOHAMED Ahmad Ibrahim Kulliyyah of Laws International Islamic University Malaysia