Surviving COVID-19. Do It Right!!- Retrenchement - Jeeva Partnership

01 Apr Surviving COVID-19. Do it right!!- Retrenchement

Posted at 23:16h in Covid19, Info by admin 0 Likes

• On 16th March 2020, the Government of Malaysia issued a nationwide Movement Control Order (MCO) until 31 March 2020, and thereafter extended the said order until 14th April 2020 pursuant to the Prevention and Control of Infectious Diseases Act 1988.

• As a result of the MCO and the subsequent effect, some companies may face extreme financial challenges and may not be able to survive with the current headcount of employees and may be opting to retrench the employees.

WHAT IS RETRENCHMENT?

Retrenchment is a form of dismissal that it justified on the basis that the employee’s role has become redundant. Redundancy may happen due to several reasons such as cessation of job functions, downturn in production, sales or economy, the introduction of new technology, business relocation, a business merger or an outsource of business or restructuring of a company. Put it simply the employee or position is no longer required.

MSS SCHEME IS ACCEPTED BY COURTS IN MALAYSIA Murali Tharan Nair v HLMG Management Co Sdn Bhd [2020] MELRU 246

Q: The law? A: Section 13(3) of the Industrial Relations Act (IRA) 1967 recognizes that the employer has the right to terminate the services of employees for reasons of redundancy or by reasons of reorganization of an employer’s profession, business, trade or work or criteria for such termination.

Q: How to prove Redundancy? A: The statutory test for determining whether an employee had been dismissed by reason of redundancy was simply whether there had been a cessation of, or diminution in the requirements of the employer’s business for the employee to carry out the kind of work for which he had been engaged.

Q: What is the selection criteria? A : Redundancy selection essentially involves two matters, firstly the choice of criteria upon which the selection process will be based and secondly, the application of the chosen criteria to the employees in question.

LIFO is the golden rule of procedural retrenchment law. The onus of justifying a departure from the LIFO principle is on the employer.

The employer must have sound and valid reasons for departure from the LIFO principle. It is also paramount for an employer to adhere to the Code of Conduct for Industrial Harmony.

Q: What is Voluntary Separation Scheme (VSS)? A : A VSS is a scheme where employees are allowed to leave or resign from their service by receiving severance package or compensation from the company.

Q: How is VSS carried out? A : It all depends on the financial capability of the company to meet with the employees’ aspiration and also the liquidity of the company. There is no hard fast rule.

Mutual Separation Scheme (MSS)

• Distinguishable from retrenchment and a Voluntary Separation Scheme (VSS)

• There are no pre-requirements on the part of the employer to make a similar offer to other employees in the category of the employee in question.

• No requirement that redundancy must be proven before such MSS is offered to an employee.

• The objective to achieve a mutual intention or consensus-ad-idem that the employer will commit itself to a financial pay-out scheme and the employee will in return agree to give up his security of tenure and consent to leave his employer voluntarily.

What measures should be taken by the employer if reduction of the workforce needs to be implemented?

• To immediately inform and discuss with the workers or the trade unions which represent them regarding any impending retrenchment.

• To offer voluntary retrenchment or voluntary retirement scheme (VSS) with the best possible compensation.

• To retire workers who have attained normal retirement age.

• To assist workers in seeking alternative employment elsewhere before retrenchment with the cooperation of Department of Labour under the Ministry of Human Resources.

• To effect retrenchment in stages over a long period.

• To terminate the foreign workers first before terminating the local workers in the same category. – Foreign Workers First Out (FWFO).

• When retrenchment involves local workers, the LIFO principle (Last In First Out) must be practiced for the same category of work. Employer may carry out retrenchment in accordance with certain criteria’s after consultation and the approval of the workers and trade unions representing them.

GUIDELINES TO ENSURE IT IS DONE RIGHT

Other Relevant Matters & Disclaimer

Links: http://jtksm.mohr.gov.my/en/akta-borang http://jtksm.mohr.gov.my

If you have any queries, please contact our Mr. Jeeva/ Mr. Kumar via e-mail, we are available for a scheduled conference call.

Messrs. Jeeva Partnership V. Jeevaretnam: [email protected] Kumarappan.R: [email protected]