Redundancy Or Retrenchment: Is It The End?

In the modern business world, it is common for companies to take over or merge with other companies or undergo internal restructuring exercises. These exercises may very well impact the employees of the business. When these exercises take place, more often than not it creates a situation of redundancy which in turn will give rise to the retrenchment of employees. The question now is what can an employee do when they are faced with such situation? Well, this article will shed some light as to what an employee can do.

Before we dwell into what an employee can do, firstly we need to understand the rights of the employers and the employees as well. This is so because what the employee can do is very dependent on whether these rights have been breached. The Courts in TWI Training and Certification (SE Asia) Sdn Bhd v Jose A Sebastian [1998] 2 ILR 879 had recognized the company's or organization's rights to undergo re-structuring or mergers and acquisitions as it is within its managerial prerogative to decide what would be in the best interest of its business arrangements; to identify its own areas of weaknesses and then decide whether to proceed with discharging its own surplus.

On the other hand, the Courts have also recognized the rights of employees to a security of tenure in their employment. In fact, the Court in the case of Hong Leong Equipment Sdn Bhd v Liew Fook Chuan & Anor [1996] 1 MLJ 481 observed that the employees' security of tenure in employment is akin to a property right under the Federal Constitution which may be forfeited, save and except for just cause and excuse. However, the Court when faced with such cases would, more often than not, need to balance out the rights of both the employer and the employee.

Now that we have understood some of the competing rights of both the employees and the employers, let us proceed to discuss what employees can do or have the right to when they are being retrenched. If the employee falls within the definition of a worker under the Employment Act 1955, i.e. persons who had entered into a contract of service with an employer for a monthly salary of not more than RM2,000.00, they will have a right to retrenchment benefits under the Employment (Termination and Lay-Off Benefits) Regulations 1980.

Retrenchment benefits are generally benefits fashioned in a monetary form, given to the employees who are retrenched. The purpose of retrenchment benefits as observed by the Chairman of the Industrial...