Avoidance of Retrenchment and Litigation during uncertain times like now

Avoidance of Retrenchment and litigation during uncertain times like now
- Post Lockdown/COVID-19

In this post MCO and unresolved COVID 19 situation there will be concerns for employers to retrench employees and concerns of employees of being retrenched.

The dilemma by the employer would be how to retrench and what are the procedures involved and for the employees the issue will be what are their rights and how to challenge retrenchment decisions.

Retrenchment occurs when there is redundancy and reasons can be as financial difficulties, termination of non-profitable sectors, reorganisation of the company etc. In this current post Covid-19 situation it will be “Financial Difficulties”.

To challenge this the employee has to show that the termination is not genuine. The courts will not interfere unless it is not genuine and the employee is being victimised. In Malaysia, there is the “Code of Conduct for Industrial Harmony “ which gives a guideline - 30(5A) of the Industrial Relations Act 1967. Although the employer has no legal obligation to follow the code but the courts have been relying in retrenchment cases and failure to follow is considered as retrenchment not done properly.

To avoid litigation and to overcome the situation amicably, we have laid down some tips for employers and employees to consider.

      1) Reduction in working hours;

      2) Reduction in working days;

      3) Multi-Tasking with a reduction in salary;

   4) Salary to be split into permanent and variable. The variable portion is to be based on          performance of the economy and the company. This portion is to be varied or cut for agreed           periods;

      5) Temporary Termination; the temporarily terminated employees can be made consultants and            used when required and paid on man-hours spent.

      6) Show the break-even point and the sustainable period for this reduction in salary.

For the employee and employer to reach an agreement which is practice and workable, it is better to get the assistance of a Mediator. One can find a mediator through the Malaysian Mediation Centre or Mediators in the relevant country. There are also on line Mediation available.

Megalai Raman & Nachammai Kumarappan
Advocate & Solicitor
Mediation Trainer, Coach & Assessor

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