Introduction

During the onset of the Covid-19 pandemic, the world was taken by storm when workers
from across the board suffered from retrenchment when corporation and companies suffered
major losses from the sudden closure of business. The definition of retrenchment was clearly
defined in the case of Central Elastic Corp (Award 205 of 1984)1 in which retrenchment
was held to be a person losing his employment due to surplus of labour in one company.
Losing one’s job is nevertheless a disaster if the person is the sole breadwinner of the family.
Even without the presence of Covid-19, retrenchment is not something novel as companies
are often looking at retrenchment as a remedial way in restructuring their business. However,
there seems to be a need to balance the right to livelihood which is a fundamental right
enshrined to us as citizens of Malaysia and the right of corporations and companies to opt for
retrenchment to salvage and improve the viability of their businesses. Nevertheless, with the
ongoing legislation in Malaysia, it is argued that the law is not able to give an answer that
satisfy both parties due to the strong competing interest between the two 2. This is clearly seen
in the case of Hong Leong Equipment Sdn Bhd v Liew Fook Chuan 3 in which the court
clearly stipulated that the relationship between an employer and an employee is on a
contractual basis in which the latter may be subject to termination by the employer in return
for some compensation.

Having said that, we will be discussing on the different employment problems faced by
workers in Malaysia and whether the current employment legislation framework is sufficient
to cater all forms of issues arising from it. On the second part of this write up, we will be
delving into comparing the Malaysian framework with that of another country.

Conclusion

As aforementioned, the notion of retrenchment brings more disadvantages compared to its

benefits. While our country is slowly but steadily moving into the endemic phase of the
pandemic, it makes one wonder whether the act of retrenchment is still there on the ground of
the pandemic. The two main legislation in Malaysia governing employment, the
Employment Act 1995 and the Industrial Relations Act 1967 do bring about certain
protection to the employees in an employer and employee relationship in which unfair

1
Central Elastic Corp (Award 205 of 1984)
2
Farheen Baig Sardar Baig, ‘Security of Tenure vs Retrenchment: The Law and Practice in Malaysia’ [2006] 3
MLJ cxxv
3
Hong Leong Equipment Sdn Bhd v Liew Fook Chuan [1996] 1 MLJ 481
dismissal or breach of contract are two of the most common grounds by the employees to
bring an action against their employer. Though it is generally up to the discretion of an
employer to lay off their workers and staffs, the court will have the jurisdiction and the power
to balance the need to ot for retrenchment and whether such will amount to an unfair
dismissal on the part of the employees. As per stated above, cases have shown that
employers generally have the prerogative to dismiss workers to ensure their own
sustainability. However, there is also a need to balance the rights of the workers from being
retrenched. It seems to be a prerequisite that the court has to first ensure that the retrenchment
exercise is not done mala fide. Likewise with other countries, retrenchment exercise is not to
be taken lightly in which the employers have to discern the need and the rationale to do so.
Besides, it is essential for employers seeking to retrench to follow strictly the express
provisions found in our legislation in order to avoid any claims of wrongful dismissal. If the
court found that the retrenchment is tainted with unfair dismissal, the court has the power to
actually reinstate the employees back to their status quo and might also order compensation
in lieu of reinstatement.4

References

Cases

1. Central Elastic Corp (Award 205 of 1984)

2. Hong Leong Equipment Sdn Bhd v Liew Fook Chuan [1996] 1 MLJ 481

Journal Articles

1. Farheen Baig Sardar Baig, ‘Security of Tenure vs Retrenchment: The Law and Practice in
Malaysia’ [2006] 3 MLJ cxxv
2. Asiah Bidin, ‘An Overview of Reorganization , Retrenchment and the Law in Malaysia’
p2001] 3 MLJ cxlv

4
Asiah Bidin, ‘An Overview of Reorganization , Retrenchment and the Law in Malaysia’ [2001] 3 MLJ cxlv