IN THE INDUSTRIAL COURT MLAYSIA

AT KUALA LUMPUR

CASE NO: 15/4-555/19

BETWEEN

NALANI A/P RAMASAMY @ THUVKANU

AND

GUOCERA SDN. BHD.

AWARD NO : 1680 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 NALANI A/P RAMASAMY @ THUVKANU (The Claimant)
by GUOCERA SDN. BHD. (The Company) on 16.10.2018.

AWARD
BACKGROUND

[1] This case 15/4-555/19 NALANI A/P RAMASAMY @ THUVKANU

was jointly heard with case no 15/4-551/19 NG SAI LEE, 15/4-552/19
KAN FUI CHENG, 15/4-553/19 YOGASWARAN A/L NADRAJA and
15/4-554/19 ONG CHENG HOON 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 on

01.04.2003 as a Clerk drawing a monthly salary of RM1,300.00. At the
time of his dismissal, she held the position of Sales Support Executive
and her last drawn salary was RM3,450.00.

2
[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 Company's town hall where after the meeting, her Head of
Department accompanied by the Human Resources Executive handed
her a Notice of Retrenchment.

[5] The Claimant claimed she was then asked to sign Notice of
Retrenchment immediately without been given any opportunity to
consider the said notice or seek advice and thereafter she was told to go
to the Company's Human Resources Department to collect her income
tax documentations before leaving the Company's premise.

[6] The Claimant contends that her 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.

3
[9] The Company contend that various functions within the Guocera
group of companies, including the Claimant were identified as redundant,
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 Sales Support
Executive was identified as a surplus to the Company's work force
requirement due to the closure of the entire Sales Support Department.

[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 RM27,040.99 which she
accepted without any protest or complaint over the sum she 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 her function ceases to exist. The Claimant’s

4
dismissal was because of the retrenchment exercise carried out by the
Company.

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'."

5
[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: -

“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

6
 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."

[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

7
 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
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”.

8
[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.

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.

9
 (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."

[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”.

10
[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.

[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.
11
[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”.

[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.

12
[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.

[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.

13
[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.

[45] This Court is of the view that it should not be concerned with what
tendered or transpired at the conciliation proceeding 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

14
[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.

[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.

15
[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 misconceived because it is
only an estimation for the companies under Guocera Holdings and does
not reflect the actual savings of the Company.

[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.

16
[58] The Claimant avers that since Lai Wai Ling her Head of
Department was not retrenched but was transferred to the Demand
Planning under the Supply Chain Department, her job function as the
Sales Support Executive too still exists t under the Supply Chain
Department.

[59] The Claimant asserts that the closure of the Sales Support
department does not tantamount to the deletion of her position and that
she being redundant.

[60] The Claimant avers that there was no reduction in her job functions
as the Sales Support Executive prior to the retrenchment exercise and
that she was carrying out her job functions as usual up to the date of the
retrenchment.

[61] The Claimant submits that it is not true her job functions were
abolished and avers that her job functions were actually transferred to the
Sales Planning and given to the Sales Planning Manager, Stella Loo and
the Executive Asrin Nadira, who were both junior in terms of years of
service to her.

[62] It is the Claimant’s contention that there is no redundancy of her

job because both Sales Support and Sales Planning Departments come
under the Domestic and Singapore Sales with Leong Wai Kit being the
head.

17
[63] The Claimant avers that prior to the retrenchment exercise the Sales
Support Department was under the Domestic and Singapore Sales.

[64] The Claimant contended that although the entire Sales Support
Department was closed down, one Ms. Lai Wai Ling, who was the
Manager in the said Department and much junior in terms of years of
service to her was not retrenched, but was transferred to the Demand
Planning in the Supply Chain Department.

[65] The Claimant avers that, although the job functions in the Sales
Planning Department are similar with the job functions in the Sales
Support Department, the Company did not even consider transferring her
to the Sales Planning Department.

[66] The Claimant asserts that she had served the Company for fifteen
years prior to the retrenchment and was a senior in terms of years of
service in the Sales Support Department.

[67] The Claimant contended that the Company failed to comply with
the LIFO principles when the Company did not consider her to be
transferred to any other department but Lai Wai Ling, who was much
junior in service to her in the Sales Support Department was instead
transferred to Demand Planning in the Supply Chain Department.

[68] The Claimant avers that her job function was to prepare daily sales
report for the northern region and forward it to the Sales Planning
Department to be summarized still exists because the two employees in
18
the Sales Support Department Stella Lo and Azreen Nadhira were not
retrenched and are carrying out the functions in the Sales Planning
Department which came under the Domestic and Singapore Sales.

[69] It was the Claimant’s contention that she served the Company for
fifteen years and was the most senior in terms of years of service in the
department, but instead of transferring her to the Sales Planning
Department, the Company retrenched her and employing a trainee one
Chong Kim How in the Sales Planning Department.

[70] The Claimant avers that the Company failed to follow the LIFO
principle when carrying out the retrenchment exercise not only with
regards to the employees in the Sales Support Department but also in
the entire Domestic and Singapore Sales Department.

[71] 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.

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

[73] 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.

19
[74] The Claimant further avers that the Company failed to provide any
consultation with her prior to the retrenchment exercise.

[75] The Claimant states that prior to the retrenchment exercise, neither
her Head of Department, Miss Lai Wai Ling or the Head of Domestic
Sales Mr. Leong Wai Kit, called or consulted her to explain why she was
selected to be retrenched and the other junior employees to her to be
retained.

[76] The Claimant avers that the reason put forward by the Company
that the SAP system had taken over the job functions in the Sales
Support Department and led to the closure of the Sales Support
Department and the position of Sales Support Executive was abolished is
baseless.

[77] The Claimant contended that the Company failed to produce any
evidence to show that the SAP system had taken over the job functions
of the Sales Support Department which led to the closure of the Sales
Support Department.

[78] The Claimant avers that the Company did not show how the SAP
system reduced the need of human intervention leading to the entire
Sales Support Department was closed down on the reason that her
position job function ceases to exists.

[79] The Claimant avers that the SAP system in 2017 did not minimize
her functions or minimize the need of human intervention on her function

20
but the SAP system in fact increased her workload rather than reducing
it.

[80] The Claimant further contended that her functions and her position
still exist because the Company placed advertisements for various
vacancies after retrenching her 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 her 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

21
functions of domestic sales and marketing and international sales and
marketing is in Petaling Jaya.

[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

22
because the price competitions.

[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.

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[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.

[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] COWS-3 gave evidence that the Claimant’s retrenchment was

brought about by the abolition of the entire Sales Support Department
together with the Sales Control & Analytics Department.

[98] COWS-3 in his statement state that the deletion of her positions
and cessation of her functions are resulted from the closure of the Sales
Support Department.

[99] The Company contends that the Claimant's duties and

responsibilities as Sales Support Executive to provide supports in the
sales organisation and team including handling of administrative tasks,
coordinating and tracking of sales order, following up on outstanding
enquiries and quotations as well as to serve as a point of contact for all
matters relating to the sales and distribution of the assigned sale regions
was taken over by the SAP system.

24
[100] COW-1 has explained at length on how the SAP system can
result to an increase in overall efficiency which leads to the Company
needed fewer work force and would able to remove redundant functions
and replaced several obsolete systems and process in the Company,

[101] COW-1 also explained that in the sales and supply sector, the
SAP system is designed to resolve complex customer orders, product
mix and offerings, pricing strategy and inconsistencies in the manual
process for creating customer quotes.

[102] COW-1 explained that the Claimant was not the only one was
retrenched but the entire Sales Support Department was retrenched from
their services which include the Claimant’s colleagues Ms. Azlina Binti
Mohd Ariff and Ms. Ng Siew Khim who are Executives in the Sales
Support Department as well.

[103] COW-3 states that the Claimant was not transferred to Sales
Planning Department because the functions in the Sales Planning and
Sales Support were different in the sense that sales planning requires a
different skill set as the data is confidential.

[104] COW-3 also states that the Sales Support job spec is more lower
down and was taken over by the SAP and the sales support can be
taken over by the sales department as everything is on SAP software
which cut down on the paper work.

[105] COW-3 has testified that the SAP system had completely
minimized the need for human intervention and the administrative tasks

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as well as the sales support tasks of the Claimant such as creating
quotation, producing reports of delivery of outstanding quotes and sales
order, monitoring goods returned and liaising with other departments
were no longer needed. With the SAP system, all departments within the
sales and supply chain were receiving real time data and did not need
manual updating.

[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
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

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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.

[112] The Company’s declining financial performance caused by

declining sales and demands as shown in page 90-91 COB-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

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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.

[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.

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

[120] 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.

[121] 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,

[122] It was also undisputed that from Company’s organisation chart

after the retrenchment at page 233 COB-8, Sales Support Department
was deleted and no one was appointed to carry out her functions
thereafter.

[123] The Company’s evidence to show that the Claimant was identified
to be retrenched because the functions in the Sales Support Department
are found to be redundant as the functions was taken over by the SAP
system and no longer required by the business remained unchallenged.

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[124] It was not disputed that the Claimant is not the only person from
the Sales Support Department who were retrenched.

[125] The Claimant contended that the Company has failed to comply
with the LIFO principle whilst carrying out the retrenchment exercise as
she compared her years of service to that of Ms. Lai Wai Ling, Ms. Stella
Lo and Ms. Azreen Nadhira.

[126] 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

[127] It is the finding of this Court that the LIFO principle does not apply
to the Claimant as a Sales Support Executive because the deletion of
the entire Sales Support Department together with Sales Control &
Analytics Department. There is no other employees in the same
category as the Claimant to be comparable within the same department.

[128] The Claimant too cannot compare her years of service to that of
Ms. Lai Wai Ling an employee holding a managerial level position
whereas the Claimant who is only carrying out functions of an executive.

[129] Ms. Lai Wai Ling is not a Manager in the Sales Support and
holding the position of Manager, Sales Control & Analytics, therefore,
carrying different scope of works and functions from that of the
Claimant’s.

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[130] Both Ms. Stella Lo and Ms. Azreen Nadhira are also not
employees under the Sales Support Department but are employed in
Sales Planning Department and Ms. Stella Lo carrying the position of
manager there. As such COW-3’s evidence that the functions carried out
by those in the Sales Planning Department and Sales Support
Department are different remained unchallenged.

[131] The Court finds that it was unreasonable for the Claimant to
assume that she is a comparable employee under the same category as
Ms. Stella Lo and Ms. Azreen Nadhira.

[132] As such, the Court finds that the retrenchment of the Claimant
was carried out in good faith because the entire Sales Support
Department was deleted and everyone in the Sales Support Department
were retrenched.

[133] 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.

[134] The Claimant claimed that the SAP system did not her job
functions prior to the retrenchment exercise as she was carrying her 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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[135] 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.

[136] 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.

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

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

the impending retrenchment exercise or consult her 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.

[139] 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.

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[140] 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.

[141] 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.

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

[143] 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.

[144] 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.

[145] 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

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

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

[147] 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 her employment was not actuated by
ulterior motive or that could be construed as an exercise in bad faith.

[148] 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.

[149] 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.

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[150] Given this facts, the Court is satisfied retrenchment by the
Company was a bona fide exercise of its managerial prerogative to run
the business operations as it deemed fit in order to successfully continue
the Company’s overall business operations.

[151] 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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