Yew Huoi, How & Associates | Leading Malaysia Law Firm

Menu

EMPLOYMENT LAW – RETRENCHMENT EXERCISE – EMPLOYMENT DISMISSAL – LAST-IN FIRST-OUT (LIFO)

What is retrenchment?

  • Retrenchment is an action taken to terminate the employment in the event of redundancy in the workforce of a company.
  • Redundancy is a situation where the employee or position is no longer required. In short, it is when an employer has more employees than it needs.

Criteria for selecting employees to be retrenched

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

This includes:

  • Ability
  • Experience
  • Skill and occupational qualifications
  • Length of service
  • Status (non-citizen, casual, temporary, permanent)
  • Age
  • Family situation

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?

  • There must be redundancy.
  • The dismissed employee must have been correctly selected for retrenchment (objective criteria).
  • Retrenchment must be done in good faith and not with motives of any unfair labour practices. In short, the employer must have a fair procedure in place before carrying out retrenchment.
  • The burden of proving that the retrenchment is bona fide lies with the employer. It is not for the employee to show that the retrenchment is unfair.
  • The burden is on the employer to prove actual redundancy. The employer has a duty to prove that the circumstances were such that the employees’ functions has to be reduced because they are considered redundant.

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

Back to Latest Legal Updates

Recent Post

CIVIL PROCEDURE – STRIKE OUT UNDER ORDER 18 RULE 19(1)(A),(B) RULES OF COURT 2012 – EXTENSION OF TIME APPLICATION

In Badan Pengurusan Subang Parkhomes v Zen Estates Sdn Bhd [2025] MLJU 3591, the High Court reaffirmed that non-compliance with Order 37 Rule 1(5) of the Rules of Court 2012 does not automatically invalidate assessment of damages proceedings. The Court held that procedural rules must be read with the overriding objective of ensuring justice, and that the six-month time limit to file a Notice of Appointment is directory, not mandatory. Finding no prejudice to the defendant and noting active case management by the plaintiff, the Court dismissed the developer’s strike-out bid and allowed an extension of time for assessment to proceed. The decision underscores the judiciary’s commitment to substantive fairness over procedural rigidity in post-judgment proceedings.

Read More »
16 11 月 ,2025 尚無留言

TORT – PURE ECONOMIC LOSS BAR REAFFIRMED: MMC LIABLE FOR NEGLIGENCE BUT PROTECTED FROM LOST PROFIT CLAIMS

In Asia Pacific Higher Learning Sdn Bhd v Majlis Perubatan Malaysia & Anor [2025] MLJU 3144, the High Court awarded over RM2 million in damages against the Malaysian Medical Council (MMC) for negligence, breach of statutory duty, and misfeasance during its accreditation of Lincoln University College’s medical programmes. While the court allowed direct financial losses such as survey costs, it barred claims exceeding RM550 million for lost profits, reaffirming the Federal Court’s rulings in Steven Phoa and UDA Holdings that pure economic loss is not recoverable from public or statutory bodies. The second defendant was further ordered to pay RM100,000 in exemplary damages for acting with targeted malice, marking a rare personal liability finding against a regulatory officer.

Read More »
16 11 月 ,2025 尚無留言

ERINFORD INJUNCTION – COURT OF APPEAL CLARIFIES: EX-PARTE ERINFORD INJUNCTIONS ARE THE EXCEPTION, NOT THE RULE

In Edisijuta Parking Sdn Bhd v TH Universal Builders Sdn Bhd & Anor [2025] 5 MLJ 524, the Court of Appeal clarified that ex parte Erinford injunctions at the appellate stage should only be granted in truly exceptional circumstances where giving notice would defeat the purpose of the order. Wong Kian Kheong JCA held that, under rule 50 of the Rules of the Court of Appeal 1994, such applications should generally be heard inter partes to ensure fairness and prevent abuse. Exercising powers under section 44(1) of the Courts of Judicature Act 1964, the Court granted a conditional interim Erinford injunction pending appeal, fortified by a RM200,000 deposit and an undertaking to pay damages. The ruling provides clear guidance on balancing urgency, procedural fairness, and judicial efficiency in appellate injunctions.

Read More »
16 11 月 ,2025 尚無留言

TOTAL FAILURE CONSIDERATION – FEDERAL COURT OVERRULES BERJAYA TIMES SQUARE: TOTAL FAILURE OF CONSIDERATION REDEFINED

In Lim Swee Choo & Anor v Ong Koh Hou @ Won Kok Fong [2025] 6 MLJ 327, the Federal Court unanimously overruled Berjaya Times Square Sdn Bhd v M Concept Sdn Bhd and clarified that the doctrine of total failure of consideration applies only to restitutionary relief, not to contractual termination. The Court held that the correct test is whether the promisor has performed any part of the contractual duties in respect of which payment is due, adopting Stocznia Gdanska SA v Latvian Shipping Co [1998] 1 WLR 574. Finding that the appellants had partly performed their obligations and the respondent had derived benefits, the Court rejected the respondent’s claim for restitution and restored the appellants’ contractual claim. The landmark decision restores clarity between contract and restitution, reinforcing commercial certainty in Malaysian law.

Read More »
16 11 月 ,2025 尚無留言

CONTRACT (BILL OF LADING) – NO DUTY TO DETECT FRAUD: COURT CLEARS MAERSK OF LIABILITY FOR FALSE CONTAINER WEIGHTS

In Stournaras Stylianos Monoprosopi EPE v Maersk A/S [2025] 2 Lloyd’s Rep 323, the English Commercial Court held that carriers are not liable for fraudulent misdeclarations by shippers where bills of lading are issued for sealed containers. The Court ruled that Maersk had no duty to verify or cross-check declared weights against Verified Gross Mass (VGM) data under the SOLAS Convention, as its obligation under the Hague Rules extended only to the apparent external condition of cargo. However, the judgment signals that a limited duty of care could arise in future where a carrier is put on notice of fraud. For now, carriers may rely on shipper declarations, but consignees must exercise commercial vigilance and due diligence when relying on bills for payment.

Read More »
16 11 月 ,2025 尚無留言

EXEMPLARY DAMAGES – STATUTORY BODY DUTY – DAMAGES – OBTAINING APPROVAL

In Big Man Management Sdn Bhd v Tenaga Nasional Bhd [2025] 5 MLJ 290, the Federal Court reinstated nearly RM3.56 million in special damages and awarded RM100,000 in exemplary damages against TNB for wrongfully disconnecting electricity to an ice factory. The Court ruled that “strict proof” of special damages does not mean a higher burden beyond the civil standard of proof and affirmed that TNB, as a statutory monopoly, breached its statutory duty by using disconnection as leverage to collect payment. The judgment underscores that public utilities cannot misuse statutory powers, and consumers wrongfully deprived of essential services may be entitled to punitive remedies in exceptional cases.

Read More »
16 11 月 ,2025 尚無留言
zh_TWZH
en_USEN ms_MYMY zh_TWZH
× 联系我们