Constructive Dismissal In Industrial Matters

There are cases whereby the employer will refuse to give a termination letter but will ask the employee to resign.  The employer will use all kind of tactics to force the employee to resign. 

The reason why a employer will ask the employee to tender a resignation letter is that the burden to prove will be with the employee and he/she must show to the Industrial court that the dismissal was without just cause or excuse.

If the employee gives a letter of resignation because of the employer's unreasonble behaviour and the matter is referred to the court, it will be named as "constructive dismissal" case or "CD case".

CD will operate when an employee resigns because of employer's behaviour.  The primary issue in a CD case is to see the conduct of the employer and not the conduct of the employee in the dismissal.  To see whether the employer without reasonable or proper cause, conduct himself in a manner calculated or likely to destroy or seriously damage the relationship of trust and confidence between the employer and the employee.   

In the case of Quah Swee Khoon v Sime Darby Bhd [2000] 2 MLJ 600 at 609, Gopal Sri Ram JCA (a retired Federal Court Judge and now a practising lawyer), he had described "CD" as:-

"A reading of the pleaded case for the parties resolved the issue that fell for adjudication before the Industrial Court into what the profession has come to call as a "constructive dismissal".  There is no magic in the phrase.  It simply means this.

An employer does not like a workman.  He does not want to dismiss him and face the consequences.  He wants to ease the workman out of his organization.  He wants to make the process as painless as possible for himself.  He usually employs the subtlest means.  He may, under the guise of exercising the management power of transfer, demote the workman.  That is what happened in Wong Chee Hong [a case law].  Alternatively, he may take steps to reduce the workman in rank by giving him fewer or less prestigious responsibilities than previously held.  Generally speaking, he will make life so unbearable for the workman so as to drive the latter out of employment.  In the normal case, the workman being unable to tolerate the acts of oppression and victimization will tender his resignation and leave the employer's services.  The question will then arise whether such departure is a voluntary resignation or a dismissal in truth and fact."

The employee must make a decision  whether to take this path, "CD".

Ramu   

Exploitation of workers

There are many forms of exploitation and bad labour practices against the workers which are not allowed at the work place.  The courts are very vigilant and will strike it down if these practices do occur at the work place.

What are the bad practices and exploitation that we are talking about here?   They are as follows:-
a)  withholding wages without valid reasons [the case of S. Santhi v Tetuan Devan Hussin];
b)  wages not paid on time;
c)  long working hours without any overtime payment;
d)  poor and hazardous working conditions and there are many more.

In a case called Hartalega Sdn Bhd v Shamsul Hisham Mohd Aini [2002] 3 ILR 122, the Chairman of the Industrial Court were of the view that "paying someone like the claimant with a low monthly of RM900 salary to hold such high degree of responsibility in terms of technical skills, knowledge and competence, reflects an element of labour exploitation by the company which the court is duty-bound to strike down"

With high degree of responsibility plus need to apply a high degree of skills with low wage is a form of exploitation and the court will favour an award for the worker.

Ramu  

Failure to pay salary

Getting calls that some  companies are refusing to pay the workers' salaries because of the Covid-19 and low revenue.

Salary must be paid on time whether he or she is a Malaysian or a foreign worker.  The employee cannot be treated as an expendable chattle or an object without feelings and emotions by not paying their salary on time.  They, the worker entered into a contract of employment with the company by way of contract  or by conduct for a wage. 

Failure to pay the wage or salary will go to the root of the contract and can lead to a  breach of contract of employment.  The worker can workout and be considered he or she to be constructively dismissed by the employer. 

In a decided case called S Santhi v Tetuan Devan Hussin [2011] 2 ILR 383  the Chairman of the Industrial Court, YA Ahmad Terrirudin Mohd Salleh, he was of the opinion that payment of salary is the most basic and fundamental term in a contract of employment.  Failure to pay the salary is a serious breach and the claimant can walk out of her employment.

Demand your salary if it is due to you.

Ramu

Retrenchment must be fair and justificable in the interest of commerce

There are many calls I received in this pressing times.  Looks like the employers are taking advantage to cut down their labour force by way of retrenchment.  Retrenchment is part and parcel of running a viable business but it should not be  done to cut cost to make more profits.  

Cutting down the work force to decrease the expenses is fine but it must be done legitimately on the best practices of industrial harmony and it must be done according to the law and procedure of the labour law.

In the case of Harris Solid State (M) Sdn Bhd & Ors v Bruno Gentil Peirara and Ors [1996] 4 CLJ 747, the learned Gopal Sri Ram JCA at that time made a observation and it is as follows:-

"An employer may re-organize his commercial undertaking for any legitimate reason, such as promoting better economic viability.  But he must not do so for a collateral purpose, for example, to victimize his workman for their legitimate participation in union activities.  Whether the particular exercise of managerial power was exercised bona fide or for  collateral reasons is a question of fact that necessarily falls to be decided upon the particular circumstances of each case"   

In the above case, the company wanted to sack the worker for his union activities but in our inquiry can the company use the present Covid-19 pandemic and the partial lockdown to cut down the work force to avoid more losses? My opinion, is a no.

What if the company was doing very well in the year 2018 and 2019 with payment of bonuses and increment of salaries to the workers and had expended the work force?

By looking at the case of Harris Solid (M) Sdn Bhd's case and the quota of Gopal Sri Ram JCA, managerial power must be exercised in a bona fide manner. The company should not victimise the workers by sacking them by reason of losing money because of Covid-19 and the partial lockdown.

Ramu

Company uses financial loss as a tool to do retrenchment

There are cases whereby the company will use the argument that the company is making losses and want to do retrenchment exercise.  Can there do so?

The company can do so but it must be done in bona fide and not in bad faith.  If the company is relying that it is suffering financial hardship and wants to retrench its employees the company must show to the court its audited accounts of business and its operational expenses and not due to increased emoluments or increase in assests.

One must take note that the court will not accept audited accounts showing losses on face value even if over a period of time.

In one decided case called Syarikat E-Rate (M) Sdn Bhd v Kesatuan Sekerja Pembuatan Barangan Galian Bahan Logam & Anor [1990] 1 ILR 106 , the court refused to accept the argument put forward by the company stating that they have suffered losses for 

the year 1986 and 1987.  But there are evidence to show that the directors had been paid directors' salaries in excess RM100,000 a year plus directors' fees, bonus and "ang pow" to the employees during the difficult times.  The court favoured and accepted the Union's argument that tax paid and depreciation cannot be described as trading losses. The matter went to the High Court and the High Court upheld the Industrial Court award.

Not easy to retrench employees on financial grounds.

Ramu

Burden And Standard of Proof

Dismissal cases heard in the Industrial court, it is the duty of the employer to satisfy the court that they have acted in a just cause or excuse in dismissing or terminating the employee from his job.

One need to refer to a well known case which is called Stamford Executive Centre v Puan Dharsini Ganesan [1986] 1 ILR 101 whereby the court decided as follows:-

"The burden of proof lies on the employer.  He must prove the workman is guilty, and it is not the workman who must prove himself not guilty.  This is so basic a principle of industrial jurisprudence that no employer is expected to come to this Court in ignorance of it".

In Ireka Contruction Berhad v Chantiravathan a/l Subramaniam James [1995] 1 ILR, the Industrial Court had said:-

"It is a basic principle of industrial jurisprudence that in a dismissal case the employer must produce convincing evidence that the workman committed the offence or offences the workman is alleged to have committed for which he has been dismissed.  The burden of proof lies on the employer to prove that he has just cause and excuse for taking  the decision to impose the disciplinary measure of dismissal upon the employee."

Employer to prove.

Ramu

Employee refuses to listen or take orders from the employer

If an employee refuses to take orders or instructions from a employer, the employer can conclude it is an act of insubordination and it can amount to a serious misconduct.

An employee who is willfully disobeys a lawful order from his employer, it can be a serious misconduct, and it could lead to a "summary dismissal".

In a decided case called Intrakota Komposit Sdn Bhd v Kdr (B) Mohamed Bahar Mansor [2001] 1 ILR 523, the Industrial Court were of the view that if an employee  willfully disobeys a lawful and reasonable order  from the employer that shows a complete disregard of a conditional essential to the contract of service. The employee must obey the proper orders from the employer  not to breach the fundamental relationship between both of them.

Example of insubordination which can amount to a misconduct are as follows:-
a)  refusal to go on a transfer;
b)  assault on a superior;
c)  use of bad or offensive languange, etc, etc

Instructions and orders

What if the instructions or orders given by the employer is unreasonable, illegal or not authorised by the law?  What can the employee do?

The answer to that question,  he must lodge a complaint or raise the grievances to the human resources department or to the labour or industrial department to resolve amicably in a view to maintain  industrial harmony in the company.

The instructions must be lawful and reasonable for the employee to perform  and it must be realistic.

Ramu

Companies and cost cutting measures to face economic challenges

There are cases whereby the Industrial court will take into account cost-cutting measures to stay in business. I would like to refer to 2 cases.  They are:-

JE Virus Pandemic/Covid-19

RIH Management Sdn Bhd v National Union of Hotel, Bar & Restaurant Workers, Peninsular Malaysia [2003] 3 MELR 545.

In this case the hotel management was facing a revenue drop because of the Japanese Encephalitis or "JE virus" pandemic.  The hotel management entered a collective agreement or "CA" on the workers' annual increment due on 1 January 2000.

The Union claimed that the hotel management had failed to pay their annual increment.  The hotel management countered their argument by saying because of the JE virus the hotel in not doing well and they cannot fulfill the CA.

The court accepted the reasoning by the hotel management treated it a "special circumstances" and the hotel management entitled to vary the CA.

The court allowed the increment to be deferred  pending renegotiation of the CA.

Salary reduction and company shut down

In the case of Viking Askim Sdn Bhd, Butterworth v National Union of Employees In Companies Manufacturing Rubber Products (1985)1 MELR 130, the company had shut down their operation to minimise losses, and decided to pay 50% per cent of the workers' salary.

The workers agreed to the shut down the company but wanted full salary. 

The court were of the view that it is fair on the payment of 50% per cent of the salary since there is no work and it is an equitable solution to maintain industrial hamony.

Ramu