INDUSTRIAL COURT OF MALAYSIA

CASE NO: 23(28)(3)/4-394/04

BETWEEN

WONG WAI HUNG

VS

EQUANT INTEGRATION SERVICES SDN BHD

AWARD NO: 1589 OF 2011

Before : Y.A. KAMARUZAMAN BIN AB JALIL - CHAIRMAN

Award By : Y.A. RAJENDRAN NAYAGAM

Venue : Industrial Court Malaysia, Kuala Lumpur

Date of reference : 10 March 2004

Dates of mention : 20.5.2004; 29.4.2005; 27.5.2005; 27.6.2005; 24.10.2005;

Dates of hearing : 17.1.2007; 18.1.2007; 25.9.2007; 26.9.2007; 27.12.2007;

Representation : Mr Anand Ponnudurai of Messrs Bodipalar Ponnudurai De

Ms Elaine Yap of Messrs Wong & Partners

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 AWARD

1. This is a reference made under Section 20(3) of the Industrial Relations Act,

1967 made on 10th March 2004 for an award in respect of the dismissal of Wong Wai

Hung (“the Claimant”) by Equant Integration Services Sdn Bhd (“the Company”).

2. Introduction

The Reference was received by the Industrial Court on 8 th April 2004 and the

case was assigned to Court No 3 and subsequently transferred to Court No 28. The

hearing was completed before the then Chairman in Court No 28 on 29 th September

2007. However, the Honourable Chairman was transferred out of the Industrial Court

before he could hand down an award. On 8 th June 2011, the consent of the parties

was obtained for another Chairman to hand down the award and the case was then

transferred to Court No 23. I then set down the case for submissions on 7 th September

2011 and I now proceed to deliver the award.

3. Facts

The claimant aged 44 years at the time of giving evidence was employed by

Equant Integration Services Sdn Bhd (hereinafter referred to as “the Company”) as

General Manager (as per letter of appointment) on 24 th August 2000. His last drawn

salary was RM28,298 plus RM4,000 fixed transport allowance per month. The

Company based in Kuala Lumpur was in the business of providing integration services.

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The Company belonged to a group known as the Equant Group. The parent company

of the group is Equant N.V., which is a Dutch incorporated company. The group also

had another subsidiary company in Malaysia called Equant Malaysia Sdn Bhd, which

was providing network services. Soon after the Claimant's appointment, the two

companies merged at the end of 2000 with the Claimant being made Country Manager,

being responsible for the merged business in Malaysia and Equant Integration Services

Sdn Bhd went into voluntary liquidation.

Subsequently, on 30th June 2011 another merger took place between the Equant

Group and Global One Group of companies, resulting in a surplus of labour. The

streamlining of management started in May 2001 at the higher levels and moved

downwards. In Malaysia, as a result of the merger, a new position of Head, Market &

Sales was created and the company found that there were two contenders for the

post, the Claimant and the other was a Global One employee named Johnny Murray,

based in Indonesia. The Company picked Johnny Murray and this led to the

termination of the Claimant on 26th July 2001.

The Company produced 2 witnesses to establish the ground of redundancy.

They were COW1, the company's Head of Regional Human Resources to give evidence

on the restructuring of the Company and COW2, the claimant's immediate superior

based in Singapore to give evidence on the position and duties of the claimant and his

redundancy.

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 According to COW1, the parent company Equant N. V. in June 2001 had

acquired the shares of another company, collectively known as “Global One” from the

France Telecom Group, which resulted in the merger of Equant N.V. Global One and

France Telecom. The reason for the merger was for the company to improve the

competitive position of the Equant Group in the global communications industry and to

provide greater benefits to its customers. As a result of the merger, there was a

duplication of functions worldwide and hence a need to rationalize the workforce to

reduce costs. The company on 30 th June 2001 informed the employees of the merger

and on 23rd August 2001, the President & CEO of Equant made a corporate

announcement in an email to all employees of the impending reduction of staff by

about 3,000 positions to reduce costs and to improve revenue and its competitiveness.

In Malaysia, as stated above, COW1 stated that after the merger in June 2001, the

parent company found that they had surplus labour in that they now had two

contenders for managing their business in Malaysia.

COW2, the claimant's immediate superior in Singapore stated that the claimant

performed general management responsibilities including the sales function in 2000.

He stated that as a result of the global merger in June 2001, the focus of the company

in Malaysia changed from Integration Services to Network Services and this business

was carried out through Equant Malaysia Sdn Bhd and as a result Equant Integration

Services Sdn Bhd became defunct. He said that the streamlining of management had

started way before 1st July 2001 at higher levels and slowly moved downwards. He

said that the claimant was aware of the restructuring, as he had discussed it with him.

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As a result of the restructuring, a new position was created in Equant Malaysia Sdn

Bhd, which had taken over the residual market & sales duties of the claimant in the

defunct company. This new position was called Head, Market & Sales. There were

two contenders for the position as stated above. The company picked Johnny Murray,

a Global employee, over the claimant based on skill and experience.

The claimant stated that as General Manager/Country Manager, he was in charge

of the company's merged business operations in Malaysia and reported directly to

COW2. The company had about 30 employees. He stated that in 2001, the company

had undergone a merger with Global One. The parent company had informed

customers and employees of the merger via letters dated 29 th June and 30th June 2001.

However, the claimant stated that he was not informed of his retrenchment in advance.

On 26th July 2001, he was called for a meeting with COW2 and handed a letter stating

that his employment was terminated on grounds of redundancy. It came as a shock

to him and naturally he was upset. The company did offer a severance package and

the claimant stated that he had no choice in the matter but to accept the severance

package. The claimant avers that his position and functions had not become redundant

and that on the very same day of his termination, his position was taken over by

Johnny Murray, an expatriate. Further, that the whole exercise of retrenchment was

not fair.

4. Whether the claimant was redundant?

Burden and Approach

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 In the instant case, there is no dispute that the claimant was dismissed on 26 th

July 2001 by the company on grounds of redundancy. As the company had given

redundancy as the ground for the dismissal of the claimant, the Industrial court is duty

bound to investigate the facts and circumstances of the case to determine whether the

exercise of the managerial power was bona fide. (see William Jacks & Co (M) Sdn Bhd

v S. Balasingam [1997] 3 CLJ 235 C.A.). The burden on the company is to prove its

case on a balance of probabilities and the Court in evaluating the evidence, must be

mindful that it must have regard to the substantial merits of the case without regard to

technicalities and legal form, hence giving it some flexibility in arriving at its decision.

(see Telekom Malaysia Kawasan Utara v Krishnan Kutty Sanguni Nair & Anor [2002] 3

CLJ 314 at page 322).

Right of the employer

It is trite law that an employer is entitled organize his business in the manner he

considers best. So long as that managerial power is exercised bona fide, the decision

is immune from interference by the Industrial Court. (See William Jacks & Co (M) Sdn

bhd v S. Balasingam supra). But this right of the employer is limited by the rule that

he must act bona fide and not for a collateral purpose. (see Harris Solid State (M) Sdn

Bhd & Ors v Bruno Gentil s/o Pereira & Others [1996] 4 CLJ 747 CA). What this means

is that he cannot act with motives of victimisation or unfair labour practice. Nor should

he use the cover of reorganisation to rid himself of employees who have incurred his

displeasure or promote some favoured employees to the detriment of others. (See

East Asiatic Company (M) Bhd v Valen Noel Yap [1987] 1 ILR 363a). Hence, subject to

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this limitation, the employer has the right to determine the volume of his labour force

consistent with his business and organisation and if by restructuring his business, some

of the employees become excess of the requirements of the business, the employer is

entitled to discharge the excess.

Though the burden is on the employer to show that decision to reorganise and

subsequent redundancy of the claimant is bona fide but the evidential burden is on the

claimant to show otherwise.

Redundancy

The term “redundancy” has not been statutorily defined by the Industrial

Relations Act 1967. However, the Industrial Court has accepted the definition given to

it by Dunston Ayadurai in his book titled “Industrial Relations in Malaysia” as “a surplus

of labour”. Hence, the main reason as to why a redundancy situation arises is because

the restructuring of the business by the employer has resulted in a surplus of labour.

What this means is that the business now requires fewer employees to do the work. It

does not mean that the job or work no longer exists. (see Stephen Bong v FCB (M)

Sdn Bhd & Anor [1999] 1 LNS 131 HC). Where a surplus of labour had arisen in a

company, the retrenchment of the surplus labour is justified.

Evaluation

In the present case, the claimant was employed in August 2000 by the company

as the General Manager and at the end of 2000, when the business of Equant

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Integration Services and Equant Malaysia Sdn Bhd merged, he became the Country

Manager for Malaysia. In Jun 2001, the parent company, Equant N.V. merged with the

Global One Group of Companies and they now had a surplus of employees as

expressed in their letter dated 23rd August 2001 and they had to eliminate 1,500

positions by the end of 2001.

As far as Malaysia was concerned, the business of the company continued with a

new focus and the position occupied by the claimant was now redesignated as Head,

Market & Sales. There was no question of the job not existing. But there were now

two contenders for the position, hence, as stated above, the redundancy of the

claimant did not mean that the job of the claimant did not exist any longer. The job

was there but there were now two contenders for it. In other words, there was a

surplus of labour. The company needed only one and the other had to be retrenched.

They elected to keep Johnny Murray and retrench the claimant. It had been submitted

that Johnny Murray was not an employee of the company, as he was an employee of

Global One. This was true before the Equant Group merged with the Global One

Group of Companies in June 2001. But after the merger, COW1 stated that the service

of Johnny Murray was transferred to the company and COW2 stated that they did not

treat Global One employees any differently from Equant employees in deciding who

should be retrenched. COW2 stated that the company picked Johnny Murray based on

his skills and experience. The mere fact that Johnny Murray was preferred by the

company over the claimant does not ipso facto mean that the claimant was victimised.

The evidential burden is on the claimant to lay the foundation for such a claim but this

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has not been established. COW2 who was responsible for identifying the redundant

employees in South East Asia has given a detailed explanation as to why the company

had picked Johnny Murray. In the absence of any evidence that the decision was

made arbitrarily, it is not the function of this Court to interfere with the management

prerogative in selecting Johnny Murray over the claimant. As regards the principle of

“LIFO”, it has been established that Johnny Murray was a longer serving employee and

better suited for the new position in the company. It was also submitted that section

60M of the Employment Act 1955 prohibited the replacement of a local employee with

a foreign employee. With respect, the Employment Act 1955 only applies to employees

earning less than RM1,500. In any event, the era of globalisation has reached the

shores of Malaysia and it is now a borderless world. Employees like the claimant and

Johnny Murray have become global workmen and have to compete on a global level

unlike employees in the civil service.

In conclusion, it is the finding of this Court that the merger of the Equant Group

with the Global One Group, had resulted in a surplus of labour for the company in

Malaysia and as such the services of the claimant were no longer required by the

company, which made him redundant.

5. Whether the retrenchment of the claimant was fair and just?

Code of Conduct

In considering the second question of whether the retrenchment of the claimant

was done in a fair and just manner, the Industrial Court has generally adopted the

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principles contained in the “Agreed Industrial Relations Practices” annexed to the Code

of Conduct for Industrial Harmony. The authority for the reception of the Code is found

in section 30(5A) of the Industrial Relations Act 1967. The said section provides for the

Industrial Court to take into account any Code relating to employment practices

between employers and workmen,which has been approved by the Minister of Human

Resources.

Burden

Hence, the burden on the company is not only to establish that the claimant was

redundant but also to show that the retrenchment was done in a fair and just manner.

However, the evidential burden is on the claimant to establish in what manner, the

retrenchment has not been fair.

Evaluation

The claimant was appointed on the 24 th of August 2001 as the General Manager

of Equant Integration services Sdn Bhd. The contract of employment provided for

permanent employment, which was generally up to 55 years. He was then about 37

years of age. The claimant stated when he was interviewed for the position, the

parent company had already decided to merge its two Malaysian companies ie Equant

Integration Services Sdn Bhd and Equant Malaysia Sdn Bhd and he was expected to

manage both companies. Subsequently, at the end of 2000 when the companies

merged, he become the Country Manager. The performance of the claimant was not

an issue and as at the end of 2000, he had met with the targets set by the company.

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In February 2001, the company gave the claimant a salary revision. Up to this point

in time, the company had acted very fairly to a faithful employee. But unknown to the

claimant, things were brewing at the parent company in Europe, which eventually

would be disastrous to the claimant's employment in Malaysia. The Claimant stated

that though at the end of June 2001, the parent company did issue circulars informing

employees of the global merger but he was not aware that he will be retrenched. The

claimant continued with his service until 26 th July 2001. On this fateful day, he was

called for a meeting with COW2 and was handed the letter of termination. He said

that he was shocked and distressed. Although COW2 stated that the claimant knew

that his position may become redundant about a month earlier, he admitted that the

claimant was only notified of his redundancy by him on 26 th July 2001. No reason has

been given by the company as to why the claimant was not consulted or told earlier, as

required by clauses 21 & 22(a)(I) of the Code of Conduct for Industrial Harmony. The

company has contended that there is no legal obligation to consult or warn the

employee. This is not quite true. As stated above, the obligation is imposed by

section 30(5) of the Industrial Relations Act 1967, which directs the Court to act in

accordance with equity and good consideration and in this regard, by virtue of section

30(5A) the Court has the discretion to take into consideration the Code of Conduct for

industrial harmony. Hence, since the claimant was neither consulted or given early

warning of his impending dismissal, his retrenchment cannot be considered fair, as it

had been hard and brutal.

Further, in considering the principle of fairness, the Court has to have regard for

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the manner in which the claimant was unceremoniously booted out of the company on

26th July 2011. The claimant was the company’s Country Manager at the time ie the

number one employee in Malaysia and yet COW1 did not see it fit to accord him the

courtesy he deserved. After handing over the marching orders to the claimant, COW1

escorted the distressed claimant to his office to collect the company's property. Hence,

not only was the claimant's permanent employment brought to a sudden end but he

was treated in a shabby manner. This certainly does not accord with the principle that

the employee has to be treated in a fair manner and there must be “a fair go all

around”. (see Re: Loty and Holloway and the Australian Workers Union [1971] AR

(NSW).

Finally, the company has attempted to make some amends by making severance

payment to the claimant. The fundamental principle which runs through Industrial

Jurisprudence is the principle of fairness and in the instant case, the principle requires

the right of the employer to reorganise his business to be balanced against hardship

suffered by the retrenched employee, by the payment of adequate compensation, as

encapsulated in section 22(a)(ii) of the Code of Conduct for Industrial Harmony. The

company has made a payment of RM263,480 to the claimant, however the said

payment consisted of the following:

(i) 3 month's salary in lieu of contractual notice

(ii) 3 month's transport allowance

(iii) 3 months severance pay

(iv) annual leave

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 (v) contractual bonus – RM41,172

(vi) expense claims outstanding.

The above break down of the payment shows that the claimant in effect only received a

severance payment of 3 months. It was contended by counsel for the company that 3

months severance pay was the standard industrial practice in retrenchment cases.

With respect, no evidence was adduced to establish the so-called practice and no

authority was produced to show that it has the sanction of the Industrial Court. It

stands to reason that every case has to be decided on its own facts and there can be

no fixed formula. It was further submitted that since the claimant had worked for the

company for only 9 months, it did not warrant a payment of more than 3 months.

With respect, this again misses the point. The principle of fairness requires the

company to pay compensation to the claimant to mitigate the hardship caused to him

as a result of the termination of his employment by the company. In considering the

adequacy of the compensation paid, the Court has to have regard inter alia for the

substantial merits of the case. In the present case, the retrenchment of the claimant

came about due to the merger of two global companies and not because the company

was in dire financial straits. As a result of the merger, the parent company stated that

it had a bright future and it stated that I quote “our business is in the 'sweet spot' in

global communications”. In contrast, the claimant who was earning a handsome salary

of RM28,298 plus a RM4,000 transport allowance as the top employee in Malaysia with

an expectation of long term employment was axed. He was then about 38 years of

age and after retrenchment remained unemployed for about 1½ years before obtaining

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alternative employment. He has since been retrenched and remains unemployed.

Hence, in the circumstances, it is the view of this Court that the severance payment of

mere 3 months is certainly not adequate compensation.

6. Finding

For the reasons given, it is the finding of this Court that the retrenchment of the

claimant is not fair and just and as such his dismissal is without just cause or excuse

and is accordingly set aside.

7. Remedy

Compensation

In the circumstances of this case, compensation is the more appropriate remedy.

The claimant's last drawn salary was RM28,298 plus a fixed transport allowance of

RM4,000 per month, making a total of RM32,298 per month. The claimant had worked

for the company for about 11 months. After his dismissal, the claimant was

unemployed for about 1 year 6 months before he obtained alternative employment with

Hewlett Packard (M) Sdn Bhd as a General Manager drawing a salary of RM27,747 per

month. However, he has since been retrenched and is currently unemployed. In the

circumstances, the claimant will be awarded of 24 months but he will not be awarded

any compensation in lieu of reinstatement, as he had not completed a full year of

service. In computing the award, the Court will take into account his post dismissal

earnings and the 3 months severance payment which has been made to him.

Accordingly, the award will be as follows:

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 RM32,298 x 24 months : RM775,152

Less (post dismissal earnings RM27,747 x 6 months)

: RM166,482

Less (severance payment)

RM32,298 x 3 months : RM 96,894

: RM263,377

Total : RM511,775

8. Order

It is hereby ordered that the company shall pay the claimant the sum of

RM511,775 through his solicitors Messrs Bodipalar Ponnudurai De Silva within 15 days

from the service of this award.

HANDED DOWN AND DATED THIS 1ST. DAY OF NOVEMBER, 2011.

signed
( RAJENDRAN NAYAGAM )
CHAIRMAN
INDUSTRIAL COURT, MALAYSIA

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