LMY* (“The Claimant”) v. MI Sdn Bhd* (“The Company”)
Malaysia Industrial Court Award No. 1403 of 2023
The Case:
- The Claimant was hired by HM Sdn Bhd* on 1st Oct 2012 and confirmed as a Deputy Editor on 27th Feb 2013, with a salary exceeding RM4K.
- Eventually, MI Sdn Bhd acquired HM Sdn Bhd’s publishing license and took over its operations.
- The Claimant was then employed by the new company as the Executive Editor, starting from 1st Jun 2018.
- On 20th Apr 2020, the Company offered the Claimant a Mutual Severance Scheme (“MSS”) because it was not doing well, serving her with a 2 months notice and a severance package calculated based on the 2.05 years she had been with MI Sdn Bhd.
- The Claimant appealed to include her previous years of service at HM Sdn Bhd, which amounted to over 7 years, in the calculation of her severance package. However, the Company rejected her appeal.
- Consequently, the Claimant rejected the MSS, and on 23rd April 2020, the Company retrenched her, citing financial difficulties and redundancy, with only the 2-month notice period given.
The Findings:
- The Company faced financial challenges for various reasons including reasons caused by the Covid-19 pandemic. In 2018, the Company incurred a financial loss of RM1.54m, followed by losses of RM2.74m in 2019 and an addition 1.6m the following year, leading to the cessation of its operations on 30th Jun 2020.
- At that time, there were 23 employees in the Company including the Claimant:
- The MSS was offered to 13 employees, including the Claimant, out of which 5 rejected it.
- 6 employees voluntarily resigned, while 2 probationers were not confirmed due to the circumstances.
- The remaining 2 employees were on fixed-term contract, and their contracts were not renewed.
- Consequently, when the company decided to cease operations on 30 Jun 2020, the 5 employees who rejected the MSS were retrenched since there would be no further job opportunities due to the Company’s closure.
- The Company notified the employees, including the Claimant, and followed the appropriate processes in compliance with the relevant laws and regulations regarding the retrenchment exercise.
The Outcome:
- The Court determined that the Company’s decision to close down the business from 30 Jun 2020, due to continuous financial losses was evident.
- The Court concluded that the termination of the Claimant’s employment due to redundancy was done in good faith, and the Company fulfilled its burden of proof.
In summary, the business faced financial difficulties. Employee was offered the option of voluntary dismissal through the MSS. Employee was dissatisfied with the MSS offered. Employee rejected the MSS and chose to continue working. However, with the eventual closure of the business, the employee was retrenched as part of the overall retrenchment exercise. Employee subsequently sued the Company. Employee lost the case.
I am interested to hear about lessons you think we can learn from this case.
* Names have been modified.
#MSSGoneWrong #BebelEmploymentAct #AuntyHR
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