IN THE INDUSTRIAL COURT MLAYSIA

AT KUALA LUMPUR
CASE NO: 15/4-553/19

BETWEEN

YOGASWARAN A/L NADRAJA

AND

GUOCERA SDN. BHD.

AWARD NO : 1678 OF 2020

Before : Y.A. PUAN REIHANA BTE ABD. RAZAK

Chairman

Venue : Industrial Court, Kuala Lumpur

Date of reference : 12.04.2019

Dates of mention : 09.05.2019, 20.06.2019, 03.07.2019,

23.07.2019, 15.08.2019, 23.08.2019,
13.01.2020, 02.03.2020, 16.03.2020.

Dates of hearing : 25.09.2019, 27.09.2019, 24.10.2019,

05.12.2019, 11.12.2019, 30.01.2020,
10.02.2020.

Representation : Mr. Suria Kumar D.J. Paul

Messrs. Suria Kumar & Co.
Counsel for the Claimant

Mrs. Mehala Marimuthoo together with

Ms. Nurhamizah Bustami
Messrs. Shook Lin & Bok
Counsel for the Company

1
REFERENCE
This is a reference by the Minister of Human Resources pursuant to
Section 20(3) of the Industrial Relations Act, 1967 arising out of the
dismissal of YOGASWARAN A/L NADRAJA (The Claimant) by
GUOCERA SDN. BHD. (The Company) on 16.10.2018.

AWARD
BACKGROUND

[1] This case 15/4-553/19 YOGASWARAN A/L NADRAJA was jointly

heard with case no 15/4-551/19 NG SAI LEE, 15/4-552/19 KAN FUI
CHENG, 15/4-554/19 ONG CHENG HOON and 15/4-555/19 NALANI A/P
RAMASAMY @ THUVKANU and the Company GUOCERA SDN. BHD.

BRIEF FACTS

[2] The Company is with the Guocera Group of companies primarily

engaged in the manufacturing and distribution of a full range of ceramic
and porcelain wall and floor tiles.

[3] The Claimant commenced employment with the Company on

01.04.2008 as a Credit Control Executive drawing a monthly salary of
RM3,800.00. At the time of his dismissal, he held the position of Senior
Executive of Credit Control with a salary of RM6,580.00 per month.

[4] The Claimant asserts that on 16.10.2018, the Company called the
Claimant together with all other employees to attend a brief meeting at the

2
Company's town hall where after the meeting, his Head of Department in
the present of the Company’s lT Manager and Financial Officer handed
him a Notice of Retrenchment.

[5] The Claimant claimed he was then asked to sign Notice of

Retrenchment immediately without been given any opportunity to
consider the said notice or seek advice and thereafter he was told to go to
the Company's Human Resources Department to collect his income tax
documentations before leaving the Company's premise.

[6] The Claimant contends that his termination by the Company

amounts to dismissal without just cause or excuse and unfair labour
practice.

[7] The Company avers that due to the significant impact on the
profitability of the business and reduction in the production, marketing,
sales, and other functions, the Company’s business were affected.

[8] The Company averred that after a thorough assessment of its

business, the Guocera Group of companies including the Company
embarked on a nationwide restructuring and retrenchment exercise across
its entities to enable it to continue as a going concern, sustain its
operations, improve its profit, reinvent its business strategies, and achieve
operational effectiveness to capture the market.

[9] The Company contend that various functions within the Guocera
group of companies, including the Company were identified as redundant,

3
resulting in approximately 248 employees being retrenched as their
positions were abolished and their functions ceases to exist in the
organization.

[10] The Company also averred that a new system was introduced by the
Company in 2017 where the business software in the system had
integrated all areas of business and provides end-to-end solutions for all
the processes in a business very less human intervention and managerial
supervision.

[11] The Company avers that the Claimant’s position as Senior Executive
of Credit Control was identified as a surplus to the Company's work force
requirement.

[12] As a measure of goodwill in line with the package offered to

employees affected by the retrenchment exercise, the Company offered
the Claimant a severance package in the sum of RM50 212.45 which he
accepted without any protest or complaint over the sum he received from
the Company.

[13] The Company contended that there was a genuine need to

reorganize its business in the manner it deems fit and that the Claimant’s
position was redundant and his function ceases to exist. The Claimant’s
dismissal was because of the retrenchment exercise carried out by the
Company.

4
THE LAW

[14] As there is no dispute on the issue of dismissal in this case, the sole
issue that arose for the determination of the Court is whether the
Claimant’s dismissal was with just cause or excuse.

[15] In COLGATE PALMOLIVE SCLN. BHD. V. YAP KOK FOONG

(AWARD 368 OF 1998), it was held as follows:

"In a section 20 reference, a workman's complaint consists of two

elements: firstly, that he has been dismissed, and secondly that such
dismissal was without just cause or excuse. It is upon these two elements
being established that the workman can claim his relief, to wit, an order
for reinstatement, which may be granted or not at the discretion of the
Industrial Court. As to the first element, industrial jurisprudence as
developed in the course of industrial adjudication readily recognizes that
any act which has the effect of bringing the employment contract to an
end is a 'dismissal' within the meaning of section 20. The terminology
used and the means resorted to by an employer are of little significance;
thus, contractual terminations, constructive dismissals, non-renewals of
contract, forced resignations, retrenchments and retirements are all
species of the same genus, which is 'dismissal'."

[16] The dismissal is about retrenchment arising out of a reorganization

exercise by the Company. It is trite law that the right to reorganize is a
managerial prerogative as was firmly in the case of WILLIAM JACKS &
CO. (M) SDN. BHD. V S. BALASINGAM [1997] 3 CLJ 235 where the
Court of Appeal define the term “retrenchment” as follows:-

5
 “Retrenchment' has been defined as the discharge of surplus
labour or staff by an employer for any reason whatsoever
otherwise than as a punishment inflicted by way of disciplinary
action. Whether the retrenchment exercise in a particular case is
bona fide or otherwise is a question of fact and of degree
depending on the peculiar circumstances of the case.

It is well settled that the employer is entitled to organize his

business in the manner he considers best. So long as the
managerial power is exercised bona fide, the decision is immune
from examination even by the Industrial Court. However, the
Industrial Court is empowered, and indeed duty-bound, to
investigate the facts and circumstances of the case to determine
whether the exercise of power is in fact bona fide”.

[17] In the case of HARRIS SOLID STATE (M) SDN. BHD & ORS V.
BRUNO GENTLL PEREIRA & ORS [1996] 4 CLJ 747, Gopal Sri Ram
JCA at p. 767 held as follows

An employer may organise his commercial undertaking for any

legitimate reason, such as promoting better economic viability. But
he must not do so for a collateral purpose, for example, to victimize
his workmen for their legitimate participation in union activities.
Whether the particular exercise of managerial power was exercised
bona fide or for collateral reasons is a question of fact that
necessarily falls to be decided upon the peculiar circumstances of
each case."

6
[18] In PENGKALEN HOLDINGS BHD. V. JAMES LIM HEE MENG
[2000] 2 ILR 252 the Court summarizes the proposition on redundancy as
follows:

“The existence of surplus or supernumerary staff or a

redundancy situation can arise due to a number of situations. A
business entity facing a severe cutback in business volume or
which is attempting to rationalise its business may have to
reorganise and/or downsize. Where a whole production line or
business unit is discontinued, the need for employees to work on
that line or unit no longer exists. Both the job functions and the
jobs of the employee in the said line or unit have ceased to exist.
The business entity with such a problem of surplus workers
would have to consider the painful option of retrenchment of its
surplus staff who were previously holding posts which have
since become redundant and are abolished accordingly.”

[19] A genuine redundancy may also arise when the business requires
fewer employees. In the case of STEPHEN BONG V. FCB (M) SDN. BHD.
& ANOR [1999] 1 LNS 131 the High Court Judge stated as follows:-

Redundancy situations arise where the business requires fewer

employees of whatever kind ('Harvey on Industrial Disputes '). In the case
before me, it is the Company's case that there was reduced work and
reduced business, which made the applicant's position as an executive
director in charge of one group redundant. The Industrial Court is right
when it held that the applicant was redundant.”

[20] The burden of proof of is on the employer to prove actual

redundancy with concrete proof, which eventually leads to the

7
 retrenchment of the employee. Merely to show evidence of re-
organization by the Company is not sufficient. The Court of Appeal in
BAYER (M) SDN BHD V. NG HONG PAU [1999] 1 MELR stated as
follows:-

On redundancy it cannot be qainsaid that the appellant must come to the

Court with concrete proof. The burden is on the appellant to prove actual
redundancy on which the dismissal was qrounded.

[21] In the case of SISTEM TELEVISYEN MALAYSIA BHD. & ANOR V.

SUZANA ZAKARIA [2005] 1 ILR 853 AT P.856, held as follows:

“..... Hence to justify the retrenchment, there must first be

redundancy. To prove redundancy, the company must prove that
there is surplus of labour or that the requirement of the job functions
of the employee has ceased or has greatly diminished to the extent
that the job no longer exists or that the business requires fewer
employees of whatever kind resulting from a reorganization exercise
or due to whatever other legitimate reasons”.

[22] In determining whether the Claimant was dismissed with just cause
or excuse by the retrenchment exercise undertaken by the Company, this
Court will have to determine whether there was genuine redundancy
situation had arisen which requires a need for the reorganization exercise
by the Company.

8
EVALUATION AND FINDINGS

[23] At the commencement of the trial, the Company’s counsel raised an

objections under Section 54 Industrial Relations Act 1967 as to the
admissibility as evidence the Claimant’s Letter of Complaint to the
Industrial Relations Department dated 22.11.2018.

[24] Section 54 of The Industrial Relations Act, 1967 provides as

follows: -

"Exclusion of evidence as to certain matters54. (1) where a trade

dispute relates to matters as to which negotiation or conciliation
proceedings have taken place under this Act, no evidence shall be
given in the proceedings before the Court as to such negotiation or
conciliation proceedings other than a written statement in relation
thereto agreed to and signed by the parties to the dispute.

(2) In a proceeding before the Court on a reference to the Court under

subsection 20(3), no evidence shall be given of any proceeding
before the Director General under subsection 20(2) other than a
written statement in relation thereto agreed to and signed by the
parties to the reference.

(3) No evidence shall be given in proceedings before the Court with

regard to any offer relating to any matter connected with the trade
dispute made without prejudice by any person or trade union except
with the consent of that person or trade union.

(4) The exclusion specified in subsections (1), (2) and (3) shall also
be applicable in any proceedings before any other Court."

9
[25] The Company submit that the letters dated 22.11.2018 was
addressed to the Industrial Relation Department containing the Claimant’s
grievances against the Company forwarding various allegations over the
retrenchment exercise carried by the Company on 16.10.2018.

[26] The Company submits that the said letter clearly caught by the
limitation of s. 54 of the Act because it was prepared and submitted at the
material time the representations were filed and during the conciliation
stage proceeding before the officers at the Industrial Relations
Department.

[27] The Company state that s. 54(2) of the Act clearly states that “no
evidence shall be given of any proceeding before the Director General
under subsection 20(2) other than a written statement in relation
thereto agreed to and signed bv the parties to the reference ”.

[28] The Company submits that the Claimant’s letters dated

22.11.2018 is inadmissible pursuant to Sec 54(2) of the Act on the basis
the letter is not “a written statement ...agreed to and, signed by the
parties to the reference”.

[29] The Company submits that nothing in the said letter refers to any
statement agreed to and signed by the Company. The said letter is neither
is a written statement agreed to and signed by the Claimant and the
Company who are parties to the reference.

10
[30] The Company submits that in a proceeding before the Court on a
reference under section 20(3), no evidence given in the proceeding before
the Director-General of the Industrial Relations under section 20(2) which
is the conciliation proceeding, unless a written statement agreed to and
signed by the Claimant and Company who are parties to the reference is
produce before the Court.

[31] The Company further submits that the Claimant’s letters dated
22.11.2018 is inadmissible pursuant to Sec 54(3) of the Act because there
is no consent given either by the Company or by the Claimant to be
produce before the proceeding in this Court.

[32] The Company submits that the said letter clearly caught by the limitation
of s. 54 of the Act because it was prepared and submitted at the material time
the representations were filed and was before the Director General of the
Industrial Relations during the conciliation proceeding at the Industrial
Relations Department.

[33] The Company submits that letter is a document that formed part of
the conciliation proceedings, therefore it ought to be excluded.

[34] The Company submits that the Federal Court in Minister of Labour
& Manpower & Anor v. Wix Corporation South East Asia Sdn Bhd
[1980] 2 MLJ 248 (FC) should be followed to exclude all evidence “before
the Director General under subsection 20(2) other than a written statement
in relation thereto agreed to and signed by the parties to the reference”.

11
[35] The Claimant contended that the letter dated 22.11.2018 is only a
written complaint made to the Industrial Relations Office pursuant to
Section 20(3) Industrial Relations Act 1967.

[36] The Claimant argued that the letter is not caught by the ambit of s.
54 of the Industrial Relations Act 1967 because it is merely a written
complaint to the Industrial Relations Office pursuant to Section 20(3)
Industrial Relations Act 1967 made prior to the conciliation proceeding in
the Industrial Relation Department and not during the conciliation
proceeding.

[37] The Claimant contended that the letter dated 22.11.2018 only
contains the version of the Claimant in respect of events that led to the
dismissal and has nothing to do with the events that transpired in the
conciliation proceedings. Therefore, the Claimant submit that the letter
dated 22.11.2018 are admissible as evidence.

[38] The Claimant contended that the letter does not contain evidence
neither is evidence of the conciliation proceeding before the Director-
General of the Industrial Relations at the Industrial Relations Department.
As such, the letter should be admissible as evidence supporting the
Claimant’s case in the hearing before this Court.

[39] The Claimant submits that the Company failed to show that the said
the letter are documentary evidence relied upon by the Claimant in the
conciliation proceeding before the Director-General of the Industrial
Relations at the Industrial Relations Department.

12
[40] A proceeding before the Industrial Court on a reference under
section 20(3) IRA comes about when there is no settlement in the
conciliation proceedings before the Director-General of Industrial Relations
at the Industrial Relations Department. The Industrial Court is then to
determine the dismissal based on the pleadings and justifications, which
both parties shall make and advance at the hearing.

[41] A plain reading of the provision of Sec 54 of the Act, it is a clear

provision is that the legislature intended to exclude as evidence
proceedings before the Director-General of Industrial Relations not only
from the Industrial Courts but also from other Courts too.

[42] The Federal Court in MINISTER OF LABOUR AND MANPOWER &

ANOR. v. WIX CORPORATION SOUTH EAST ASIA SON. BHD. [1980]
2 Ml-J 248, was concerned with keeping out evidence that transpired in
the conciliation proceedings.

[43] The Court is of the view that in conciliation proceedings parties are
free to make confessions, admissions and offers to each other with a view
to settle the case.

[44] Having perused the pleadings and the counsels’ submissions on the
objection raised, the Court opined that the said letter dated 22.11.2018
was prepared and submitted at the material time the representations was
filed and obviously should have been before the Director-General of
Industrial Relations to be referred to and will form part of the evidence of
the Claimant during the conciliation proceeding at the Industrial Relations
Department.
13
[45] This Court is of the view that it should not be concerned with what
tendered or transpired at the conciliation proceeding e before the Director-
General of Industrial Relations at the Industrial Relations Department. The
said letter no matter what is the content of it is a document that formed
part of the Claimant’s evidence at the conciliation proceedings.

[46] The letter too is not a written statement agreed to and signed by the
parties to the reference. As such, the said letter was caught within the
ambit of section 54.

[47] This Court therefore finds that whatever adduced and transpired
between the parties at the conciliation stage in the Industrial Relation
Department ought not to be taken into account in considering the
Claimant’s claim for reinstatement. The production and the disclosures of
the letter dated 22.11.2018 before this Court is not admissible

[48] The final award by the Court shall be made on the pleadings and
justifications which both parties advance at the hearing excluding all the
references made to the Claimant’s letter dated letter dated 22.11.2018
before this Court.

[49] The Company called the Head of Supply Chain, Mr. Peter James
Williams (COW-1), the Guocera Group of companies and the Company’s
Financial Controller Mr. Lam Kong Chark (COW-2), the Company’s Head
of Retail Sales, Mr. Tan Kok Sang, (COW-3) and the Company's Human
Resources Manager, Mr. Bhupinder Singh (COW-4) while the Claimant
was the sole witness for her case.

14
[50] In the Notice of Retrenchment dated 15.10.2018, the Company
informed the Claimant that the Company’s sales and profit had reduced
significantly in the past years and that the Company need to take steps
across the organization to lower costs and operate more efficiently.

[51] The Company also stated in the Notice of Retrenchment that

following the assessment of the Company’s business structure, the
Claimant’s position was abolished and her role has become redundant.

[52] The Claimant asserts that it is not true and merely an afterthought of
the Company that it suffered loss of profits due to lack of demand in its
product and that the sales volume was down.

[53] The Claimant submit that the Company was not facing any financial
difficulties because the Company paid bonuses to employees in January
2019 which was not long after the retrenchment exercise on 16.10.2018
and also upgraded employees which also would had entail an increase in
salaries.

[54] The Claimant contended there was no reason for the Company to
embark in restructuring exercise because they had not taken the
necessary steps of cost cutting measures before the retrenchment.

[55] The Claimant contended that the Company’s reliance on the

headcount reduction as reflected in COB-9 is missed conceived because
it is only an estimation for the companies under Guocera Holdings and
does not reflect the actual savings of the Company.

15
[56] The Claimant also avers that there was also no evidence to show
that the Company was suffering with financial losses as there was no
attempts made by the Company to cut costs, reduce employee’s salaries
or overtime or the Company tried to transfer her to another department or
another company within the Group.

[57] The Claimant further contends that there was no evidence adduced
by the Company that the SAP system had successfully reduced the need
for human resource or reduction in the number of employees.

[58] The Claimant avers that there was no reduction in his job functions
as the Senior Executive of Credit Control prior to the retrenchment exercise
and that he was carrying out his job functions as usual up to the date of
the retrenchment.

[59] The Claimant avers that he has experience in both the domestic and
international markets because he was transferred from the domestic
market to the international market and vice versa.

[60] The Claimant avers that he served the Company for ten years and
was the senior in his department.

[61] The Claimant avers that when he was handling the domestic market,
he had opened sixty accounts for small retailers.

16
[62] It was the Claimant’s contention that he served the Company for ten
years and was the most senior in terms of years of service in the
department, but the Company retrenched him and retained the junior
employees in terms of years of service to him.

[63] The Claimant contended that there was no minimization of his

functions neither was his functions in the domestic and international in the
Credit Control Department reduced.

[64] The Claimant contended that his position was not abolished neither
was his ceased to exist because the Credit Control Department still exists
and all the employees who were in the Department prior to the
retrenchment exercise remained there.

[65] The Claimant contended that his job functions in Credit Control for
International and Domestic markets still exists and it is being carried out
by Ms. Jeya, who was junior to him in terms of grading and years of
service.

[66] The Claimant contended that at the time of the retrenchment

exercise, he was heading the international accounts and that Ms. Jeya
who was retained was trained by him and reports to him who was later
promoted as an executive.

[67] The Claimant contended that the Company failed to follow the LIFO
principle with regards to the employees in the Credit Control Department
when carrying out the retrenchment exercise.

17
[68] The Claimant contended that as a senior employee of the Company,
he was victimized when the Company departed from the LIFO principle
and that the Company did not provide any cogent reason as to why they
had departed from the LIFO principle.

[69] The Claimant avers that the Company breaches their obligations
under the relevant provision of the Code for Industrial Harmony as the
Company failed to give her advance warning about the impending
retrenchment.

[70] The Claimant asserts that the Company failed to give the Claimant
any warning pertaining to the intended retrenchment exercise prior to the
town hall meeting held on 16.10.2018.

[71] It was the Claimant’s contention that the Company only made one
announcement about the retrenchment exercise on 16.10.2018 within less
than 24 hours as in their email dated 15.10.2018 sent at 12.38 pm.

[72] The Claimant further avers that the Company failed to provide any
consultation with her prior to the retrenchment exercise.

[73] The Claimant states that prior to the retrenchment exercise, neither
his Head of Department one Lim Shuh Fan or the Company's Financial
Controller Lam Kong Chak (COW-2), called or consulted him to explain
why he was selected to be retrenched while Ms. Jeya will be retained to
take over his job functions and his junior one Choong Wei Yee (Esther
Choong) will be retained too.

18
[74] The Claimant asserts that the reason why he was retrenched was
not because of his job function cease to exist or diminished, but it was
because the Company want to get rid of him as they was unhappy with
him on his working relationship in the Company and that he was also on a
long sick leave.

[75] The Claimant also avers that the Company also confirmed a
temporary clerk called Shaila as Accounts Assistant in the Credit Control
Department post retrenchment.

[76] The Claimant avers that he was the only employee in the entire
Finance & Credit Control Department who was retrenched.

[77] The Claimant avers that the reason put forward by the Company the
SAP system reduced job functions in the Finance & Credit Control
Department and the Claimant’s position is abolished and no longer require
by the Company.

[78] The Claimant contended that the Company failed to produce any
evidence to show the SAP system had taken over the job functions of the
Finance & Credit Control Department which led to his dismissal.

[79] The Claimant avers that the Company did not show how the SAP
system SAP system reduced the need of human intervention in the the
Finance & Credit Control Department leading to his position and job
function ceases to exists.

19
[80] The Claimant further contended that his functions and his position still
exist because the Company placed advertisements for various vacancies
after retrenching him as shown pages 40-41 CLB-1.

[81] The Claimant claimed that the advertisements show that the job
functions were not abolished but the Company was just looking to engage
employees at a lower salary to carry out his functions.

[82] It is the Company’s case that the reasons leading to the need for
the Company to carry out retrenchment exercise was due to the profits
and sales for the Guocera Group of companies have reduced
tremendously as shown in page 90-91COB-7 while its operational costs
had increased over 5 years as tabulated in page 188-189 COB-8.

[83] COW-2 the Guocera Group of companies and also the Company’s
Financial Controller in his evidence explained in detail about the inter-
relation of the all the companies within the Guocera Group of companies.
COW-2 states all the group of companies operate as a single entity but
are inter-dependent in the business of manufacturing and distribution of
tiles.

[84] COW-2 explained that Guocera Sdn. Bhd. (the Company) is an entity
by itself operating from 2 locations where the manufacturing of porcelain
product and ceramic products are done in Kluang while the functions of
domestic sales and marketing and international sales and marketing is in
Petaling Jaya.

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[85] COW-2 also states that the manufacturing cost including the cost of
production, Selling, General and Administration Expenses, unsold
Finished Goods Stock and the Net Working Capital have been increasing
for the Company’s ceramic and porcelain factory in Kluang and Meru from
years 2014 to 2018.

[86] COW-2 states that as the stock started to build up and with the
softening of the demand of the orders, the Company then reduces
production and subsequently closed its Kluang as well Meru kilns.

[87] COW-2 states that apart from the production and manufacturing costs,
the Company too bore the selling, general and administration expenses
which was going up all the way in financial year 17/18.

[88] The Company’s Head of Retail Sales, Mr. Tan Kok Sang, [COW-3]
elaborated on the financial condition of the Company giving detail
explanation about the difficulties and sales losses faced by the Company
due to the challenges in the tiles industry.

[89] COW-3 compared all the revenues from sales for central, northern,
and southern regions as well as the gallery sales performance as shown
in page 190 COB-8 showing the decrease in the volumes of tiles sold and
amount of sales from years 2016 to September 2018. COW-3 states that
the Company also faces tremendous pressure coming from retail side
because the price competitions.

21
[90] COW-3 also states that the Company closed up its old showroom
and shifted to new showroom and before the retrenchment, the Company
closed down the 1st floor showroom and operate only a smaller size
showroom.

[91] COWS-4 the Company’s Head of Human Resources Department,

Mr. Bhupindar Singh explained in detail about the excess work force and
cost savings exercise that led to the retrenchment.

[92] COW-4 states with the financial condition and after assessing on the
number of employees in the Company, there were excess work force in
the Company, which require the Company to reduce the headcounts in the
Company.

[93] COW-4 states that it did not make any business sense for the
Company to keep the same number of workforce when the kilns have been
closed, production, and sales slowed down significantly.

[94] COW-4 states that the effect of the slowdown in manufacturing, sales
and distribution rendered some functions and positions in the
manufacturing, distribution, finance, marketing and sales departments was
identified as redundant. COW-4 states that retrenchment is therefore
inevitable if the Company intends to safeguard the business.

[95] COW-4 also explained that the SAP System introduced in year 2017
was another reason for the Company having to embark on the restructuring
exercise where various functions in several departments within the
Company were rendered redundant.
22
[96] COW-4 explained the SAP system implementation had completely
minimized the need for human intervention on most of the business
processes especially related to the entering of the data, stocks, orders,
processing of the orders, credit approval which were remotely managed by
the SAP system.

[97] COW-2 the Company’s Financial Controller, gave evidence that the
Claimant’s retrenchment was brought about by the minimization of the
functions carried out in the Credit Control Department where the domestic
and international functions reduced significantly.

[98] The Claimant claimed that he had experience in credit control both
domestic and international markets.

[99] COW-2 in his evidence avers that the Claimant has no in-depth
experience in credit control for international market because he was at all
time handling credit control for domestic market until in 2017.

[100] COW-2 explained at length that when the Company decided to test
the Claimant’s capability and ability to adapt to international credit control
works, he was found incapable and handicapped.

[101] COW-2 explained further that before Ms. Jeya took over the credit
control for the domestic, she was already in the credit control of the
international while the claimant was in charge of the credit control of
domestic.

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[102] COW-2 states that, he frequently gets complaints about the
Claimant especially from the sales team, the head of the domestic sales,
and colleagues in the sales team about the Claimant’s work relation which
did not work well with the sales team.

[103] COW-2 explained further that when the Claimant, was on a long sick
leave, after discussing with the finance manager, COW-2 placed Ms. Jeya
to take charge of the domestic sales credit because domestic sales
represent something like 70 % of the total Company’s sales at that time.

[104] COW-2 states that Ms. Jeya has to cross over to help and to assist
on domestic sales credit control matters. COW-2 states that the domestic
sales credit matters was well taken care by Ms Jeya as she was a
meticulous, organized person and know her job well.

[105] COW-2 states that when the Company decides to resize its work in
the Credit Control Department, COW-2 decided to keep Ms. Jeya over the
Claimant as she was more well verse with the jobs in the credit department
as compared to the Claimant.

[106] The Company pleaded that the retrenchment exercise on

16.10.2018 is a necessary step taken by the Company due to the financial
condition of the Company.

[107] The Company through its witnesses put forth evidence of the
Company’s downward trends in sales and profits, increase of

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manufacturing and production costs, the reduction of productions and
workloads, SAP system and the challenging conditions of the tiles
industries and markets as reasons that led the Company to restructure for
leaner organizational and management.

[108] The Company has adduced various documentary evidence to show

the financial condition, sales and profit of the Company, the increasing of
costs and expenses as well as the conditions of the tiles industries, which
were all not disputed by the Claimant.

[109] The Claimant did not dispute the Company’s downward trends in
sales and profits, increase of manufacturing and production costs, the
challenging conditions of the tiles industries and markets and the
misfortune befallen the Company’s many competitors in the same
industries.

[110] The Company has shown numerous cost-cutting measures

embarked by the Company in order to stave off the need for retrenchment
including cessation of kilns in Kluang and Meru factories, closure of
branches and warehouse and transferring of branches or gallery to smaller
space with cheaper rents. This was never challenged by the Claimant.

[111] COW-2 and COW-3 provided clear and consistent evidence of the
Company's financial conditions, revenues, sales and losses of the
Company supported with the relevant financial documents.

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[112] The Company’s declining financial performance caused by declining
sales and demands as shown in page 90-91COB-7 and page 190 COB-8
and the increase in its operational costs over the 5 years as reflected in
page 188-189 COB-8 was not challenged by the Claimant. As such it is
proven that the Company indeed suffered loss in profits and sales.

[113] The Claimant too did not dispute the figures relating to the drop in
sales, profits and the increase in costs presented by COW-2 and COW-3
neither did the Claimant challenge the figures showing the financial status
of the Company as being inaccurate

[114] From the detail evidence of COW-2 about the Company’s financial
situation, supported by COW-3’s evidence, which was unchallenged by the
Claimant, the Court is of the view that the retrenchment exercise is a
necessary step taken by the Company to sustain the business.

[115] The Court finds that there is nothing to doubt in COW-2 and COW-
3’s evidence supported by various documents adduced which all shows
that the Company was going through financial difficulties. The fact that the
Company’s profits was deteriorating, the Claimant’s contention that the
Company was not in any financial difficulties is unsubstantiated.

[116] The Court is of the view that that due to the continued deterioration
of profits, the Company’s financial performance was unsustainable, as
such, it is justified for the Company to review its operations and take
drastic measures to improve the Company’s efficiency in all its affairs.

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[117] The Claimant also did not challenge the evidence of the Company’s
Financial Controller Mr. Lam Kong Chark (COWS-2) that the reasons
leading to the need for the Company to carry out retrenchment exercise is
due to market downturn, declining sales and profits, stiff competition due
to influx of foreign tiles and increasing of production costs.

[118] The Claimant also did not challenge all this evidence because she
is aware of the Company’s situation since she had been working within the
tiles industries for many years and surely have knowledge of the difficulties
faced by the Company.

[119] There is no evidence led by the Claimant to prove that the decision
by the Company was bad faith.

[120] The Claimant also did not challenge the Company’s decision
embarking into reorganising the organisation structure to create a leaner
structure to meet the needs of the business and the new direction it
intended to take to safeguard its business.

[121] It was also undisputed fact that the Claimant was not the only
employee retrenched but there were other employees too affected by the
restructuring exercise. The fact that no new employees employed to
replace the Claimant, it goes to prove that the retrenchment is not
motivated by any bad intention or victimisation by the Company on the
Claimant.

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[122] The Court opined that the Company has the prerogative to
reorganize its business operations in any manner for the purpose of its
economic viability and in the manner, the Company think best so long as
that managerial power is exercised bona fide.

[123] It was also undisputed that from Company’s organisation chart after
the retrenchment at page 233 COB-8, no one new was appointed to carry
out his functions thereafter.

[124] The Claimant alleged that the Company has failed to comply with
the LIFO principle whilst carrying out the retrenchment exercise as he
compared his years of service to that of Ms. Esther Cheong Wai Yee ,Ms.
Shaila Banu and all other employees in the Finance & Credit Control
Department except for Ms Nor, Noor and Ms. Jeya.

[125] It is a trite law that in determining whether LIFO principle has been
breached, the Court must compare employees of the same category, rank,
or status.

[126] The Claimant cannot compare his years to Ms. Esther Cheong
because she is not a Credit Control Executive but an Export
Documentation Executive reporting to Ms. Jeya. Ms. Esther Cheong also
carries different functions and roles from that of the Claimant.

[127] The Claimant too cannot compare his years to Ms. Shaila Banu
because she is also not a Credit Control executive but a temporary clerk
who was later confirmed as Account Assistant in the Finance Department

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which is also a different department and carrying different functions to that
of the Claimant’s.

[128] Neither can the Claimant compare his years to all employees in
finance and Credit Control Department as all of them carries different
functions, position, having different qualifications, experience and
expertise from that of the Claimant. The Claimant admitted to these facts
under cross examination.

[129] The Court is of the view that it is unreasonable for the Claimant to
expect the Company to retain him in the positions of Ms. Esther Cheong
as an Export Documentation Executive and of Ms. Nora as a Credit Admin
Assistant, who both hold lower position, grade, roles and functions not
equivalent to the Claimant’s position, grade, benefits, roles and functions
as a Senior Executive.

[130] The Court is satisfied that the Company has complied with the LIFO
principle in respect of the Claimant because Ms. Jeya undisputedly have
more years of services in the Credit Control Department where Ms. Jeya
has combined knowledge of both the domestic and international credit as
she has been in the department since year 2002.

[131] The Court also has no doubt on COW’s evidence that the Company
retrenched the Claimant to resize the Credit Control department as
headcount for the Claimant’s department dropped from four to three.

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[132] The Court finds that Ms. Jeya was retained in the department to
carry out the combined role and supported by the Export Documentation
Executive and the Credit Administration Assistant based on her expertise
which the claimant did not have.

[133] The Claimant too did not challenge COW-2 evidence at all about
Ms. Jeya’s performance over his performance. Neither did the Claimant
adduced any evidence to the contrary about Ms. Jeya’s expertise,
capabilities and experience as described by COW-2 over his. As such the
Company’s selection of Ms. jeya over the Claimant was a fair selection in
this case as it was not disputed by the Claimant.

[134] As it was not disputed that Ms. Jeya has longer years of service than
the Claimant, therefore, the Company has adhered to the LIFO principle in
selecting the Claimant for retrenchment.

[135] COW’s evidence that Ms. Jeya has always carried out the works in
both domestic and international markets and due to the minimization of the
functions in the Credit Control Department, the Company no longer need
to retain 2 employees to carry out these functions was not challenged by
the Claimant.

[136] The Court is of the view that the LIFO principle does not apply
towards the Claimant and Ms. Esther Cheong because they do not belong
under the same category.

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[137] As COW-2’s selection was not disputed, the Court opined that
COW-2 made fair and objective assessment of why he decided to choose
Ms. Jeya over the Claimant.

[138] It was also unchallenged evidence that COW-2 gave an opportunity

to the Claimant to perform functions in respect of the international market
in order to assess his ability and aptitude in his position.

[139] COW-2’s finding that the Claimant was found to be laking of ability
and knowledge compared to Ms. Jeya who was able to perform credit
control functions for both international and domestic markets very well was
also not challenged by the Claimant.

[140] As such, the Court finds that the Company selection was fair and
therefore the retrenchment of the Claimant was carried out in good faith.

[141] The Court is of the view that the LIFO principle does not apply to the
Claimant and it is no obligation for the Company to look for alternative
employment for the Claimant. The Company has not breached the LIFO
principle in its decision to retrench the Claimant.

[142] The Claimant claimed that the SAP system did not his job functions
prior to the retrenchment exercise as he was carrying his job functions as
usual up to the date of the retrenchment. The Claimant contended that
COW-1 was not able to show that the work force for the Company can be
reduced with the introduction of the SAP system.

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[143] On this contention, the Court finds that the introduction of SAP is not
the main reason for the Claimant’s retrenchment because if it was, the
retrenchment would have been carried out in year 2017.

[144] The Claimant alleges that the Company has failed to adhere to the
Code for Industrial Harmony for reasons that the Company did not give
advance warning and prior consultation to the Claimant.

[145] In the present case, the the Company did inform the Union of the
retrenchment exercise on 16.10.2018 and this was not disputed by the
Claimants at all.

[146] On the Claimant’s contention that the Company failed to warn on

the impending retrenchment exercise or consult him to make any offer for
alternative employment, the Court finds that the company was not obliged
to do so. It is a trite law that the Company has no legal obligation to consult
or forewarn the employees of the retrenchment exercise.

[147] It was not mala fide on the part of the Company not to consult or
discuss with the Claimant on its determination to reorganise the Company.
Furthermore, the Code of Conduct for Industrial Harmony imposes no legal
or contractual obligation on the Company. The Company too was not
obliged to make any offer for any alternative employment to the Claimant.

[148] The Court is also of the view that there is no obligation or justification
for the Company to notify the Claimant on the selection criteria before
deciding to carry out a retrenchment exercise.

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[149] With the undisputed evidence and unchallenged evidence of the
Company’s financial situations, the Court is satisfied that there was
genuineness on the part of the Company in exercising the restructuring the
work force of its business entity. The retrenchment was a was properly
carried out and it was a bona fide exercise.

[150] The Claimant avers that his retrenchment was done with mala fide
and his position is not redundant because the Company had placed job
advertisements after the retrenchments exercise.

[151] The Company’s evidence that no new employee was recruited to

take over the Claimant’s position and functions as shown in the
Company’s post-retrenchment organization chart was not disputed by the
Claimant.

[152] The Company’s evidence that the job advertisements relate to the
positions that became vacant when the employee holding that position
resigned after the retrenchment exercise was also not challenged or
disputed by the Claimant.

[153] In the absent of any evidence to the contrary, the Court is of the
view there is no mala fide intention of the Company because the
resignation of the employees holding that position were not within the
Company’s contemplation when retrenchment took place. Furthermore,
the advertisements posted by the Company in JobStreet was done
pursuant to unanticipated resignation of several employees after the

33
retrenchment exercise was carried out and are in respect of positions and
functions not-related to the Claimant’s.

[154] Neither was there any evidence adduced and the Claimant was not
able to explain as to why he did not apply for any of the positions if at all
that he wanted to proof the Company victimised him by retrenchment with
a view to hire new employees to perform his functions at a lower salary.

[155] The Court is of the view that the Claimant was unable to show
anything that can demonstrate to this Court’s satisfaction that the
Company’s decision to terminate him employment was not actuated by
ulterior motive or that could be construed as an exercise in bad faith.

[156] In the present case, there was surplus of the work including the
works the Claimant was performing and the Company requires fewer
employees. Under these circumstances, the Claimant’s position was
excess to the requirements the Company, therefore the Company is
entitled to discharge such excess.

[157] The Court is satisfied that the reasons in the dismissal letter were
not a manipulative act on part of the Company to victimize the Claimant.
The Company exercised its managerial powers bona fide and the
Claimant's termination was with just cause or excuse.

[158] Given this facts, the Court is satisfied retrenchment by the Company
was a bona fide exercise of its managerial prerogative to run the business

34
operations as it deemed fit in order to successfully continue the Company’s
overall business operations.

[159] Taking into account the totality of the evidence adduced by both
parties and bearing in mind s. 30(5) of the Industrial Relations Act 1967 to
act according to equity, good conscience and the substantial merits, the
Court finds that the Company had established on a balance of probabilities
the reasons for the Claimant’s termination on grounds of redundancy.

The Claimant's case is hereby dismissed.

HANDED DOWN AND DATED 16 NOVEMBER 2020

-Signed-
(REIHANA BTE ABD. RAZAK)
CHAIRMAN
INDUSTRIAL COURT MALAYSIA
KUALA LUMPUR

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