Aug 14, 2020
(C) Reporting the Retrenchment
Employers must inform the retrenchment, voluntary separation, temporary layoff or an employee's paycut to the nearest Labour Office before any act of termination action through the prescribed Termination Form.
Failure to submit the report within the specified timeline is an offence under the EA and the employer could be fined for not more than RM10,000 for each offence.
(D) Retrenchment Benefits
For employees who are within the Employment Act, the Regulations grant that an employee would be entitled to termination or lay-off benefits if the employee was employed under a continuous contract of employment for at least 12 months before the termination. Following the Regulations, the quantum of termination benefits to be paid is prescribed.
For employees who are not a part of the Employment Act, the obligation to pay retrenchment benefits and the quantum of retrenchment benefits, if any, would be in accordance with their employment contract, if suitable.
Employers are also needed to submit the prescribed form to the Inland Revenue Board of Malaysia at least 30 days before the date of retrenchment.
Misusing Retrenchment
With natural rights that allow employers to manage their employees, there have been situations where employers have dismissed their employees under the guise of retrenchment. In these circumstances, the Court may find that the employees are being terminated without just cause.
For instance, it was held that the retrenchment procedures were not bona fide where the employee was made redundant but the job with the same duties and functions remain or where employees who were terminated were, in fact, all active union members.
If the Court finds that there is unfair labour practice under the guise of retrenchment due to abuse of power or there is no genuine retrenchment, the Court may conclude that the dismissal was without just cause or excuse.
In this case, the Court may order reinstatement or compensation in lieu of reinstatement and back wages of a maximum of 12 months of the employee's last drawn salary for a probationer or a maximum of 24 months for a confirmed staff.