Court of Appeal lays down principles on retrenchment of employees

21 April 2021

Ng Chang Seng v Technip Geoproduction (M) Sdn Bhd & Anor [2021] 1 MLJ 447

In Ng Chang Seng v Technip Geoproduction (M) Sdn Bhd & Anor, the claimant was chosen to be retrenched after 13 years of serving Technip Geoproduction (M) Sdn Bhd (“Company”). The claimant alleged that it was an unfair dismissal because (i) the principle of last-in first-out (“LIFO”) was not followed; (ii) the foreign workers should be retrenched first before him; and (iii) the retrenchment was mala fide because the true reason behind his dismissal was because the Company was dissatisfied with his performance.

The Industrial Court found in favour of the claimant. On appeal, the High Court quashed the decision of the Industrial Court and found in favour of the Company. Dissatisfied, the claimant then appealed to the Court of Appeal (“COA”).

The COA allowed the appeal, found in favour of the claimant and laid down a few principles regarding retrenchment of employees:

• The employer must be able to prove that the employee was redundant and could not be reassigned to other projects or work. The COA held that the Company was unable to prove so because the Company continued to re-engage employees who had been terminated on contract basis and also terminated mainly local permanent workers in favour of fix-termed contract foreign workers. 
• Retrenchment cannot be used as a short cut to get rid of employees that a company does not want because of a perceived insubordination or poor performance.
• In deciding whether there was redundancy, the court will look at the employees that were retained and also the number of employees retrenched. The test should be whether the employee that was retrenched ought to have been selected compared to other employees in the same department who remained in the employment.
• To justify not following the LIFO principle, an employer must provide clear evidence to prove that the employee does not have special skills required for the job. In this case, the Company had failed to prove so.
• An employer must retrench foreign workers first before local employees unless there are reasons to justify not doing so. In this case, the Company case had no evidence that the foreign workers had skills that the Claimant did not have and so the retrenchment was not genuine.