notes and the relevant Case law update relating to

TERMINATION OF EMPLOYMENT*
1. (i) SECURITY OF TENURE The Court of Appeal in Ang Beng Teik v Pan Global Textile Bhd Penang [1996] 3 MLJ 139 accepted the principle of security of tenure of employment as ruled by the Federal Court in R. Rama Chandran v The Industrial Court of Malaysia & Anor [1997] 1 CLJ 147 and said that : Section 20(1) of the Act protects a workman from dismissal save for just cause or excuse. Parliament has accordingly placed the right of a workman to continue in employment on the same footing as a proprietary right which may not be forfeited save for just cause or excuse. Employment, that is to say, the right to ones livelihood, is also a fundamental liberty guaranteed by the Federal Constitution. (ii) Federal Constitution Article 5(1) Liberty of the person No person shall be deprived of his life or personal liberty save in accordance with law. 2. TERMINATION

(i) In Gon Kwee Phoy v J.P. Coats (M) Sdn Bhd [1981] 2 MLJ 129 the Federal Court said that : We do not see any material difference between a termination of the contract of employment by due notice and unilateral dismissal of a summary nature. The effect is the same and the result must be the same. Where representations are made and are referred to the Industrial Court for inquiry, it is the duty of the Court to determine whether the termination or dismissal is with or without just cause or excuse. (ii) In Dr A Dutt v Assunta Hospital [1981] 1 MLJ 312 the Federal Court stated that : on a proper interpretation of the relevant sections of the Act, there is no

1
* Prepared by Cheah Choo Kheng B.Sc (USM), LLB Hons (Lond), CLP (Mal) , LLM (NTUA) for FMM Northern Branch Seminar on Understanding Industrial Relations and Maintaining Industrial Harmony on 17th April, 2003 at the Pearl View Hotel, Prai, Penang.

material distinction between dismissal and termination. Either must be with just cause or excuse to be justifiable; otherwise the Industrial Court may make an award. (reiterated by the Federal Court in Pan Global Textile Bhd Penang v. Ang Beng Teik (2002) 1 CLJ 181.) (iii) Recently, the Court of Appeal in Colgate Palmolive (M) Sdn Bhd v Yap Kok Foong and another appeal [2001] 4 MLJ 101 emphasized that : In a s 20 reference, a workmans 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 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 a contract of employment to an end is a dismissal within the meaning of s 20 of the Act. The terminology used and the means resorted to by an employer is of little significance; thus contractual termination, constructive dismissals, non-renewals of employment contracts, forced resignations and retrenchments are all species of the same genus which is dismissals. Retirement, likewise, is also a dismissal for the purpose of industrial adjudication under s 20 of the Act. 3. (i) DISMISSAL Industrial Relations Act section 20 Representations on dismissals (1) Where a workman, irrespective of whether he is a member of a trade union of workmen or otherwise, considers that he has been dismissed without just cause or excuse by his employer, he may make representations in writing to the Director General to be reinstated in his former employment; the representations may be filed at the office of the Director General nearest to the place of employment from which the workman was dismissed. (1A) The Director General shall not entertain any representations under subsection (1) unless such representations are filed within sixty days of the dismissal: Provided that where a workman is dismissed with notice he may file a representation at any time during the period of such notice but not later than sixty days from the expiry thereof. (ii) Industrial Relations Act 1967 section 2 workman Any person, including an apprentice, employed by an employer under a contract of employment to work for hire or reward and for the purposes of any proceedings in relation to a trade dispute, includes any such person who has been dismissed, discharged or retrenched in connection with or as a
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consequence of that dispute or whose dismissal, discharge or retrenchment has led to their dispute. (iii) The Federal Court in Hoh Kiang Ngan v Mahkamah Perusahaan Malaysia & Anor [1996] 4 CLJ 687 felt that Parliament intended to keep the definition of workman flexible, to be worked out on a case to case basis. As a guide, it held that the flexible and correct approach is to determine whether or not the employee is engaged under a contract of service or a contract for services. Using this approach, the Court will have to examine a myriad of factors, such as the nature, degree and extent of control exercised and the conduct of parties, etc. (iv) The term workmen may include confirmed employees, probationers 1, casual, temporary, part-time employees, fixed term contract employees2, foreign employees3, unionized and non-unionized workmen.
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See Khaliah Abbas v Pesaka Capital Corporation Sdn Bhd [1997] 3 CLJ 827 C.A. See Lt Col (B) Abdul Rahman Mohd Tahir v Menteri Sumber Manusia, Malaysia & Anor [1997] 3 CLJ Supp 37 H.C. See Kathiravelu Ganesan & Anor v Kojasa Holdings Sdn Bhd [1997] 3 CLJ 777 S.C. WITHOUT JUST CAUSE OR EXCUSE

4.

(i) In Milan Auto Sdn Bhd v Wong Seh Yen [1995] 4 CLJ 449 Federal Court followed the principle expounded in its earlier case, Wong Yuen Hock v Hong Leong Assurance Sdn Bhd [1995] 3 CLJ 344; [1995] 2 MLJ 753 that is : The function of the Industrial Court in dismissal cases on reference under section 20 is two fold, first to determine whether the misconduct complained of by the employer has been established, and secondly, whether the proven misconduct constitutes just cause or excuse for the dismissal. (ii) The common subject matters raised in cases of dismissal without just cause or excuse are : (a) (b) (c) (d) (a) poor performance, indirect dismissal, misconduct, and constructive dismissal

Poor performance

In United Plantation v Ahmed Zaini [1996] ILR 632 the Industrial Court held that for the employer to prove poor performance by the employee, three steps should be observed : i) ii) that the employee was warned about his poor performance, that the employee was accorded sufficient opportunity to improve, and
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iii)

that not withstanding the above, the employee failed to sufficiently improve his performance

(b)

Indirect dismissal

In Award 152/90, the Industrial Court held: Indirect dismissal is not a special term of art. I am using the phrase to distinguish cases of termination by the employer in which, while he is not dismissed directly, he has also not broken the contract (or otherwise behaved) so as to justify constructive dismissal. Some important kinds of dismissals for redundancy take this form and it is useful to emphasis their character as dismissals by the employer. The most obvious kind of indirect dismissal is where the employer invites the employee to resign in circumstances in which it is clear that, otherwise, the employee will in any case be dismissed. The precise formulation by the employer is immaterial whether it be invitation, request or dictation so long as the substance of it is that the employer places his employee in a position in which the employee really has no option but to tender his notice. In such situation the reality is . that the employee is dismissed . Similarly, in Industrial Court Award 428/94, the fact of coercion to resign was held to be an unfair dismissal. See M.P. Mathew Palm Oil Sdn Bhd, Prai v Arulandu a/l Alponsoh [1991] 2 ILR 1317 For compulsory resignation see VP Nathan & Partners v Lingovan Dorairaj A Suppiah & Anor [2002] 1 CLJ 248 H.C. (c) Misconduct

The following are some examples of misconduct (not exhaustive), which the Courts have held justify dismissal:i) ii) iii) iv) v) vi) vii) viii) ix)
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theft sexual misconduct habitual late coming continued absence from work insubordination1 insolence and rudeness negligence assaulting / threatening a superior disobedience of a lawful order

See Comfort Rubber Gloves Industries Sdn Bhd v Anthonisamy Arokiasamy & Anor [2001] 2 ILR 598 Constructive dismissal

(d)

If the action of an employer amounts to a breach of contract, an employee is entitled to treat himself as dismissed see Wong Chee Hong v Cathay Organisation [1988] 1 CLJ 45
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The following are some instances whereby the Industrial Court has held that the conduct of the employer has amounted to a breach of the terms of the contract, thereby entitling the employee to plead constructive dismissal. i) ii) iii) demotion / transfer : Award 396/97 breach of implied term of mutual trust and confidence : Award 238/94 humiliation : Award 80/98

iv) trivial matters but cumulatively amounting to a breach of contract : Award 267/95 v) vi) vii) not giving work : Award 267/95 putting an employee in cold storage : Award 166/94 requesting an employee to resign and preparing the resignation letter

The High Court in Tan Cheng Hing v. Federal Metal Printing Sdn Bhd & Anor [1999] 3 MLJ 564 said that it was incumbent upon the claimant to establish that the company committed a fundamental breach which went to the very root of the claimants contract 5. DOMESTIC INQUIRY

(i) It is now clear law that the non holding of a Domestic Inquiry by an employer or the holding of a defective Domestic Inquiry does not per see nullify the dismissal order. The Industrial Courts duty is to hear the matter afresh and to decide on the fact before it whether the dismissal is justified. See Dreamland Corp. (M) Sdn Bhd v. Chong Chin Sooi & Anor [1988} 1 MLJ 111 F.C. Wong Yuen Hock v Syarikat Hong Leong Assurance Sdn Bhd & Another [1995] 3 CLJ 344 F.C. Milan Auto Sdn Bhd v Wong She Yen [1995] 3 MLJ 537 F.C. Pan Global Textile Bhd Penang v. Ang Beng Teik (2002) 1 CLJ 181 F.C.. (iii) The Supreme Court in Said Dharmalingam bin Abdullah (formerly known as Dharmalingam a/l Ranganathan v Malayan Breweries (Malaya) Sdn Bhd [1997] 1 MLJ 352 has held that due inquiry , for purposes of s 14 of the Employment Act 1955, includes the right to make representations against the punishment proposed as a result of adverse findings by a domestic body. 6. CONCILIATION AND REFERENCE BY MINISTER

(i) The process of conciliation and reference by Minister was considered by the Supreme Court in Kathiravelu Ganesan & Anor V. Kojasa Holdings Bhd [1997] 3 CLJ 777 :

 there are different levels at which the machinery created by statute operates and it is important to determine the level at which the dichotomy exists. First, there is the conciliatory level. Here, all that the Director-General of Industrial Relations is concerned with is whether the parties are able to settle their differences. All that is required to activate the conciliatory jurisdiction is a complaint under s. 20(1) of the Act. Consequently, there is no question of there being any wider jurisdiction at this stage. Second, the reporting level. Once the Director-General of Industrial Relations finds the dispute irreconcilable, he merely makes his report to the Minister. If it is found that he has exceeded his powers, his action is liable to be quashed in certiorari proceedings. Again, there is no wider jurisdiction. Third, the referral level. When the Minister receives notification from the Director-General that the dispute cannot be settled, he must decide whether to refer it to the Industrial Court. He is not to refer all disputes to the Industrial Court. The question he must ask himself is whether, having regard to the facts and circumstances of the given case, the representations made by the workman is frivolous or vexatious. All that is required to call for an exercise of power by the Minister is the existence of a notification that a trade dispute as defined by the Act, which is the sense in which that expression is employed in this judgment cannot be settled. There is therefore no question of any wider jurisdiction existing at this stage. But the act of the Minister making the reference has, as will be seen in a moment, jurisdictional consequences. The decision to refer or not to refer a dispute is therefore a separate and distinct act that may be questioned in judicial review proceedings. Fourth and last, the adjudicatory level. It is important to observe that, save in very exceptional cases which are not relevant to the present discussion, the Industrial Court, unlike the ordinary Courts, is not available for direct approach by an aggrieved party. Access to it may only be had through the three levels earlier adverted to. 7. REINSTATEMENT

(i) If the workman states in all honesty that he does not wish to be reinstated as he is happily employed elsewhere he will be held to have abandon his claim to reinstatement thus depriving the Court of jurisdiction over the matter (see Holiday Inn, Kuching v Elizabeth Lee Chai Siok [1992] 1 CLJ 141 but compare with Borneo Post Sdn Bhd v Margaret Wong Kee Sieng [High Court in Sabah and Sarawak at Kuching O.M. No. KG. 4 of 1994]). (ii) In Tanjung Manis Development Sdn Bhd v Florida Tayie Ak Ngaw [1998] 2 ILR 88 the Claimant has been unemployed since her dismissal save for a short period of about 6 months when she took up the position of Administrative Assistant with the main-contractor undertaking the construction of the Bakun Dam project. The current economic downturn has caused the project to be suspended and the Claimant to lose her job. She has had no success since then in finding other gainful employment. The facts of the case therefore calls for the reinstatement of the Claimant unless there are good grounds for the Court to decide otherwise.
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(iii) 8.

See Tenaga Nasional Berhad v Adrian C. Luis [1995] 2 ILR 221 COMPENSATION IN LIEU OF REINSTATEMENT

(i) In Koperasi Serbaguna Sanya Sdn Bhd v Dr James Alfred [2000] 4 MLJ 87 The Court of Appeal said that : In such a case [where reinstatement is refused], the Industrial Court may award monetary compensation Such an award is usually in two parts. First there is the usual award for the arrears of wages, or backwages, as it is sometimes called. It is to compensate the workman for the period that he has been unemployed because of the unjustified act of dismissal. Second, there is an award of compensation in lieu of reinstatement. 9. MITIGATION [2001] 3 CLJ 541 the

(i) In Dr James Alfred v Koperasi Serbaguna Sanya Bhd Federal Court held that :

It is in line with equity and good conscience that the Industrial Court, in assessing quantum of backwages, should take into account the fact, if established by evidence or admitted, that the workman has been gainfully employed elsewhere after his dismissal. Failure to do so constitutes a jurisdictional error of law. Certiorari will therefore lie to rectify it. What is important is that the Industrial Court, in the exercise of its discretion in assessing the quantum of backwages, should take into account all relevant matters including the fact, where it exists, that the workman has been gainfully employed elsewhere after his dismissal. (ii) In Crest Ultrasonics (M) Sdn Bhd v. Liew Siew Kim [Award No.1033 of 2002] the Industrial Court took into consideration the case of Dr. James Alfred (SABAH) v. Koperasi Serbaguna Sanya Bhd & anor [2001] 3 CLJ 541 and held that the Claimant, as admitted by her, did not make any effort to find employment despite her qualification. During the cross-examination when asked getting another job should not be difficult she answered I dont know because I didnt try. When asked again A person of your qualification could get a job easily her reply yes, I agree. Asked further by the learned counsel at least RM2,000-00 her answer yes . Under the circumstances the Court is of the opinion that a deduction of 35% is a fair amount to be deducted from the total figure RM83,302-00 minus 35% i.e. RM29,155-70 leaving a balance of RM54,146-30. 10. CONSEQUENTIAL RELIEF

(i) In R Rama Chandran v. Industrial Court of Malaysia & anor [1997} the Federal Court held that :
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 As far as possible the anxiety and endeavour of the Court should be to remedy an injustice when it is brought to its attention. On the facts of the case before the Court, to remit this matter back to the Industrial Court would mean to prolong the dispute which would hardly be fair or conducive to the interests of the parties. In the circumstances justice demands that to avoid further delay and expense, the Court should determine the consequential relief rather than remitting the case to the Industrial Court for that purpose. The appropriate remedy in this case is to grant the claimant compensation for loss of employment. He must therefore be granted back wages, plus EPF contributions and compensation for loss of further earnings, to a total of RM489,000-00.

11.

RETIREMENT

(i) The Court of Appeal in Colgate Palmolive (M) Sdn Bhd v Yap Kok Foong and another appeal [2001] 4 MLJ 103 held that : The courts task is therefore to discover what the reasonable expectation or understanding of the employees are at the relevant time concerning the matter of the age at which they can reasonably expect to be compelled to retire. In undertaking this exercise, the court has to consider all relevant facts and circumstances of this case which constituted the employment relationship between the company, on the one hand, and its employees, and the claimant on the other. normal retiring age conveys the idea of an age at which employees in the group can reasonably expect to be compelled to retire, unless there is some special reason in a particular case for a different age to apply. 12. (i) RETRENCHMENT / REDUNDANCY Employment Act 1955 section 12(3) :

Notwithstanding anything contained in subsection (2), where the termination of service of an employee is attributable wholly or mainly to the fact that (a) (b) (c) the employer has ceased, or intends to cease to carry on the business for the purpose of which the employee was employed; the employer has ceased or intends to cease to carry on the business in the place at which the employee was contracted to work; the requirements of that business for the employee to carry out work of a particular kind have ceased or diminished or are expected to cease or diminish; the requirements of that business for the employee to carry out work of a particular kind in the place at which he was contracted to work have ceased or diminished or are expected to cease or diminish;

(d)

(ii)

Retrenchment has been defined by the Court of Appeal in the discharge of surplus labour or staff by the employer of any reason whatsoever otherwise than as a punishment inflicted by the way of disciplinary action.

(iii) The Industrial Court in Cycle & Carriage Bintang Bhd v Cheah Hian Lim [1992] 2 ILR 400 laid down the salient points of general principles on retrenchment as follows: (i) It is for management to decide on the strength of the staff which it considers necessary for efficiency in its undertaking. When management decides that workman are surplus and that there is therefore a need for retrenchment, an arbitration tribunal will not intervene unless it is shown that the decision was capricious or without reason, or was mala fide, or was actuated by victimisation or unfair labour practice.
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(ii)

It is the right of every employer to reorganize his business in any manner for the purposes of economy or convenience, provided he acts bon fide.

(iii) An employer has the right to determine the volume of this staff consistent with his business and if, by the implementation of a reorganization scheme adopted for reasons of economy and better management, the services of some employees become excess of requirements, the employer is entitled to discharge such excess. (iv) In the absence of any agreement on the point, an employer is not obliged to find suitable employment for redundant workers. (v) In effecting retrenchment the employer should comply with the Industrial Law principle of LIFO unless there are sound and valid reasons for departure. Thus, an employer is not entirely denied the freedom to depart from this principle.

(vi) The retrenchment of an employee can be justified if carried out for the profitability, economy or convenience of the employers business. The services of an employee may well become surplus if there was a reduction, diminution or cessation of the type of work the employee was performing. (iv) The LIFO principle, is not applicable where there is only one workman in the particular job category (see Maybank Discount Bhd v Nooraini binti Mohd Ishak [1994] 2 ILR 822. Further, the employer can depart from this LIFO principle only for sound and valid reasons. (see Supreme Corporation Bhd v Doreen Daniel a/p Victor Daniel & Anor [1987] 2 ILR 522. (v) The Court of Appeal in William Jacks & Co Sdn Bhd v Balasingham (1997) 3 CLJ 235 said that : Whether the retrenchment exercise in a particular case is bona fide or otherwise, is a question of fact and of degree depending for its resolution upon the peculiar facts and circumstances of each case. It is well-settled that an employer is entitled to reorganize 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 a particular case to determine whether that exercise or power is in fact bona fide. See also Kumpulan Perangsang Selangor Bhd v Zain Bin Haji Mohd Noh [1997] 2 CLJ 11 (vi) : Bayer (M) Sdn Bhd v Ng Hong Pan [1999] 4 MLJ 361 the Court of Appeal held that On redundancy, it cannot be gainsaid 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 grounded
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It is our view that merely to show evidence of a re-organization in the appellant is certainly not sufficient. There was evidence before the Court that although sales were reduced, the workload of the respondent remained the same. After his dismissal, his workload was taken over by two of his former colleagues. Faced with these evidence, it is any wonder that the Court made a finding of fact that there was no convincing evidence produced by the appellant that the respondents functions were reduced to such an extent that he was considered redundant. (vii) Is retrenchment benefit payable to an employee earning wages more than RM1,50000 per month? How much is payable? See Mamut Copper Mining Sdn Bhd v Chau Fook Kong @ Leonard & Ors [1997] 2 ILR 625 and the Code of Conduct for Industrial Harmony 1975 13. VOLUNTARY SEPARATION SCHEME

(i) To downsize the workforce, the management offers an attractive package of termination benefits to encourage the employees to apply to be considered for voluntary resignation. (ii) The normal practice is that the management would decide on the eligibility of the applicants taking into account of the operational needs of the company. (iii) (iv) 14. (i) Any guidelines? Fair labour practice? Forced to accept? TERMINATION BENEFITS / RETRENCHMENT BENEFITS Employment (Termination And Lay-Off Benefits) Regulations 1980 6. (1) Amount of termination or lay-off benefits payment Subject to the provisions of these Regulations, the amount of termination or lay-off benefits payment to which an employee is entitled in any case shall not be less than ten days wages for every year of employment under a continuous contract of service with the employer if he has been employed by that employer for a period of less than two years; or fifteen days wages for every year of employment under a continuous contract of service with the employer if he has been employed by that employer for two years or more but less than five years; or twenty days wages for every year of employment under a continuous contract of service with the employer if he has been employed by that employer for five years or more, and pro-rata as respect an incomplete year, calculated to the nearest month.
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(a)

(b)

(a)

(2)

For the purposes of this regulation wages shall have the meaning assigned thereto under section 2 (1) of the Act and a days wages shall be computed in such manner so as to give the employee his average true days wages calculated over the period of twelve completed months service immediately proceeding the relevant date. For purposes of this regulation, the period of employment under a continuous contract of service shall include any such employment prior to the date on which these Regulations come into force. The termination or lay-off benefits payment to which an employee is entitled under this regulation shall be in addition to any payment to which he may be entitled under section 13 of the Act.

(3)

(4)

15. (i)

SALE OF BUSINESS Employment (Termination And Lay-Off Benefits) Regulations 1980 8. (1) Change of ownership of business Where a change occurs (whether by virtue of a sale or other disposition of by operation of law) in the ownership of a business for the purposes of which an employee is employed or of part of such business, the employee shall not be entitled to any termination benefits payable under these Regulations, if within seven days of the change of ownership, the person by whom the business is to be taken over immediately after the change occurs, offers to continue to employ the employee under terms and conditions of employment not less favourable than those under which the employee was employed before the change occurs and the employee unreasonably refuses the offer. If the person by whom the business is to be taken over immediately after the change occurs does not offer to continue to employ the employee in accordance with paragraph (1), the contract of service of the employee shall be deemed to have been terminated, and consequently, the person by whom the employee was employed immediately before the change in ownership occurs and the person by whom the business is taken over immediately after the change occurs shall be jointly and severally liable for the payment of all termination benefits payable under these Regulations. Where an offer by the person by whom the business is taken over immediately after the change occurs to continue to employ the employee is accepted by such employee the period of employment of the employee under the person by whom the employee was employed immediately before the change occurs, shall, for the purposes of these Regulations, be deemed to be a period of employment under the person by whom the business is taken over, and the change of employer shall not constitute a break in the continuity of the period of his employment.

(2)

(3)

(ii) A change in shareholding in the corporate employer would not, in itself, amount to a change of ownership of business within the meaning of Regulation 8 (see Abdul Aziz Atan v Ladang Rengo Estates Sdn Bhd [1986] 2 MLJ 98 Supreme Court).
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(iii) See Kumpulan Kamunting Sdn Bhd v Rajoo [1983] 2 MLJ 400 Federal Court where there was a sale by the Company of a part of its operations. (iv) Following Radtha Raju & Ors v. Dunlop Estates Bhd [1995] 1 CLJ 648, it was generally accepted that if an employee proceeded to accept an offer of employment under the terms of Regulation 8, there would be no termination of the employees services and no payments consequent on termination would arise. (v) The Court of Appeal in Barat Estates Sdn Bhd & Anor v. Parawakan Subramanian & ors [2000] 3 CLJ 625, held that notwithstanding compliance of Employment (Termination And Lay-Off Benefits) Regulation 8(3), an employer was, nevertheless, obliged to comply, independently, with the notice provision of the Employment Act 1955 Section 12. In that case, as no notice was given by the employer, the Court of Appeal, held that the employees who had accepted offers pursuant to Regulation 8, were, nevertheless, entitled to indemnity under the provisions of Section 13 of the Act. See Kesatuan Kebangsaan Wartawan Malaysia v Syarikat Pemandangan Sinar [2001] 3 CLJ 547 F.C. 16. RECEIVERSHIP

(i) There is a distinction between appointment by the Court and out of the Court appointment of receivers in determining its effect on the contract of employment. (ii) The appointment of a receiver by the Court operates as a discharge of the employees services (see Reid v Explosives Co. Ltd. 19 [1887] QBD 264). (iii) In the case of out of the Court appointment, the contracts of employment of a companys employees are not automatically terminated (see Griffiths v Secretary of State for Social Services [1997] Q.B. 468). (iv) The rationale for the distinction has been that in an out of the Court appointment, there would be no change in the personality of the employer as the receiver is acting as agent of the employer company. Hence, there would be no new contract upon which the employer could sue the receiver. (see Yeoh Lam Beng v United Asian Bank and Anor [1988] 3 MLJ 489). (v) Companies Act 1965 section 191 Payments of certain debts out of assets subject to floating charge in priority to claims under charge. (1) Where a receiver is appointed on behalf of the holders of any debentures of a company secured by a floating charge or possession is taken by or on behalf of debenture holders of any property comprised in or subject to a floating charge, then if the company is not at the time in the course of being wound up, debts which in every winding up are preferential debts and are due by way of wages salary vacation leave or superannuation or provision fund payments and any amount which in a winding up is payable in pursuance of section 292 (3) or (5) shall be paid out of any
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assets coming to the hands of the receiver or other person taking possession in priority to any claim for principal or interest in respect of the debentures and shall be paid in the same order of priority as is prescribed by that section in respect of those debts and amounts. (2) For the purposes of subsection (1) the references in section 292 (1) (b), (c), (d) and (e) to the commencement of the winding up shall be read as a reference to the date of the appointment of the receiver or of possession being taken as aforesaid (as the case requires). Any payments made under this section shall be recouped as far as may be out of the assets of the company available for payment of general creditors.

(3)

17. (i)

WINDING-UP Companies Act section 292 Priorities (1) (a) Subject to this Act, in a winding up there shall be paid in priority to all other unsecured debts: firstly, the costs and expenses of the winding up including the taxed costs of a petitioner payable under section 220, the remuneration of the liquidator and the costs of any audit carried out pursuant to section 281; secondly, all wages or salary (whether or not earned wholly or in part by way of commission) including any amount payable by way of allowance or reimbursement under any contract of employment or award or agreement regulating conditions of employment, of any employee not exceeding one thousand five hundred ringgit or such other amount as may be prescribed from time to time whether for time or piecework in respect of services rendered by him to the company within a period of four months before the commencement of the winding up; thirdly, all amounts due in respect of workers compensation under any written law relating to workerss compensation accrued before the commencement of the winding up; fourthly, all remuneration payable to any employee in respect of vacation leave, or in the case of his death to any other person in his right, accrued in respect of any period before the commencement of the winding up; fifthly, all amounts due in respect of contributions payable during the twelve months next before the commencement of the winding up by the company as the employer of any person under any written law relating to employees superannuation or provident funds or under any scheme of superannuation or retirement benefit which is an approved scheme under the federal law relating to income tax; and sixthly, the amount of all federal tax assessed under any written law before the date of the commencement of the winding up or assessed at any time before the time fixed for the proving of debts has expired.
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(b)

(c)

(d)

(e)

(f)

18. (i)

SECURED CREDITOR AND WAGES Employment Act 1955 section 31 : (1) Where by order of a court made upon the application of any person holding a mortgage, charge, lien or decree (thereinafter referred to as the secured creditor) or in the exercise of rights under a debenture the property of any person (thereinafter referred to as the person liable) liable under any of the provisions of this Act to pay the wages due to any employee or to pay money due to any sub-contractor for labour is sold, or any money due to the person liable is attached or garnished, the court or the receiver or manager shall not authorize payment of the proceeds of the sale or of the money so attached or garnished, to the secured creditor the debenture holder until the court or the receiver or manager shall have ascertained and caused to be paid, out of such proceeds or money, the wages of such employee, or the money due to any sub-contractor for labour under a contract between him and the person liable, which the person liable was liable to pay at the date of such sale, attachment or garnishment: Provided that this section shall only apply to the sale of a place of employment on which: (b) (c) (d) any employee to whom wages are due as aforesaid; was employed or worked at the time when such wages were earned or such money accrued due, and to the proceeds of the sale of any products of such place of employment and of any movable property therein used in connection with such employment and to any money due to the person liable on account of work performed by such employee or subcontractor for labour or derived from the sale of the products of such work: Provided further that: (a) where the person liable is an employer the total amount of the wages of any employee to which priority over the claim of a secured creditor is given by this section shall not exceed the amount due by the employer to the employee as wages for any four consecutive months work; In this section, except for the second proviso, wages includes termination and lay-off benefits, annual leave pay, sick leave pay, public holiday pay and maternity allowance.

(b) (c) (2)

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(ii) Ban Hin Lee Bank Bhd v Applied Magnetics (M) Sdn Bhd (In Liquidation) [2003] 5 CLJ 1 H.C. As there are competing claims between MBB and the employees of the company which is not covered by s 236(2)(c) of the Companies Act 1965 as this section deals with sale by private treaty and not an order of sale by the court, in order to do justice I am of the view that resort should be had to invoke s 31 of the Employment Act 1955. As such I hold that s 31 of the Employment Act 1955 applies in respect of the sale by private treaty. 19. (i) LABOUR INQUIRY Employment Act 1955 section 69 Director Generals power to inquire into complaints (1) The Director General may inquire into and decide any dispute between an employee and his employer in respect of wages or any other payments in cash due to such employee under: any term of the contract of service between such employee and his employer; any of the provisions of this Act or any subsidiary legislation made thereunder; or the provisions of the Wages Council Act, 1947 or any order made thereunder, and, in pursuance of such decision, may make an order in the prescribed form for the payment by the employer of such sum of money as he deems just without limitation of the amount thereof. (3) In addition to the powers conferred by subsections (1) and (2), the Director General may inquire into and confirm or set aside any decision made by an employer under section 14(10 and the Director General may make such consequential orders as may be necessary to give effect to his decision: Provided that if the decision of the employer under section 14 (1)(a) is set aside, the consequential order of the Director General against such employer shall be confined to payment of indemnity in lieu of notice and other payments that the employee is entitled to as if no misconduct was committed by the employee; Provided further that the Director General shall not set aside any decision made by an employer under section 14 (1) (c) if such decision has not resulted in any loss in wages of other payments payable to the employee under his contract of service: And provided further that the Director General shall not exercise the power conferred by this subsection unless the employee has made a
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(a) (b) (c)

complaint to him under the provisions of this Part within sixty days from the date on which the decision under section 14 is communicated to him either orally or in writing by his employer. (ii) Employment Act 1955 section 69B Additional powers of Director General to inquire into complaints (1) Notwithstanding the provision of this Act, the powers of the Director General under section 69 (1) (a) shall extend to employees whose wages exceed 1,500 ringgit but does not exceed 5,000 ringgit. For the purposes of this section, the term wages means wages as defined in section 2 but does not include any payment by way of commission, subsistence allowance or overtime payment. Save for Parts XV and XVI which shall apply with the necessary modifications, the other provisions of this Act shall not apply to the employees referred to in subsection (1)

(2)

(3)

(iii)

Employment Act 1955 section 69C Claims for indemnity for termination for termination of contract without notice. (1) In the exercise of his powers under section 69 B (1), the Director General may inquire into and decide any claim concerning any indemnity due to the employer by the employee where the contract of service is terminated by the employee without notice, or if notice was given, without waiting for the expiry of that notice. The Indemnity indemnity of a accrued to the unexpired term due to the employer under subsection (1) shall be an sum equal to the amount of wages which would have employee during the term of the notice or during the of the notice.

(2)

20.

QUESTIONS (i) (ii) (iii) (iv) (v) (vi) What is the burden of proof in cases of dismissal? Is domestic inquiry necessary before deciding to dismiss the employee / workman? What is the retirement age for an employee / workman? Are retrenchment benefits payable to employees earning wages exceeding RM1,500-00 per month? What is the legal status of voluntary separation scheme? Are the wages of the employee / workman really secured in the event of the company being placed under receivership / winding-up?
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(vii) Is there a need for the Retrenchment Fund? (viii) Is the proposed Industrial Appellate Court necessary? _____________________________________________________________________________________________

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