What is retrenchment?

Criteria for selecting employees to be retrenched

Code of Conduct for Industrial Harmony (“the Code”) provides guidelines on retrenchment exercises.

This includes:

A commonly applied principle – “Last-In, First-Out” (“LIFO”).

The most junior employee (in terms of length of service) would be retrenched first, compared to those who have served for a longer duration.

Section 60N of the Employment Act 1955 – Employers should terminate the services of foreign workers first before considering local employees.

Although the Code does not have force of law, employers are encouraged to comply with LIFO.

To justify not using LIFO, an employer must provide clear evidence to prove that an employee does not have the skills required for the job.

In what situation can a company retrench an employee?

Case in point: Ng Chang Seng v Technip Geoproduction (M) Sdn Bhd & Anor [2021] 1 MLJ 447. Court of Appeal (Putrajaya) – Civil Appeal no: W-02(A)-692-04 of 2019