Company used separation scheme to avoid paying retrenchment, court rules

Free Malaysia Today

05-05-2025

Canon Opto's downsizing of its workforce in June 2020, in the midst of the Covid-19 pandemic, amounted to a retrenchment, the Industrial Court said. (Facebook pic)
PETALING JAYA : A camera lens manufacturer placed some workers in a mutual separation scheme five years ago to avoid paying out retrenchment benefits, the Industrial Court has ruled.
The court questioned the company's decision to downsize its workforce 'all of a sudden' during the Covid-19 pandemic, when movement restrictions were in place, 'unless the company decided to reduce its workforce during that period'.
S Vanithamany.
S Vanithamany, chairman of the industrial court in Kuala Lumpur, said the downsizing 'in essence is a retrenchment', which would have demanded higher rates of compensation.
The court held that Canon Opto (M) Sdn Bhd, which has a factory in Shah Alam, had violated the collective agreement for failing to consult the union on the separation scheme.
In a judgment handed down recently, the court said the management chose not to consult or notify the union on the ground that the collective agreement touched only on retrenchment and not a mutual separation scheme.
However, Vanithamany said the company is required to consult the union, representing the workers, whenever it makes a decision which involves massive (number of) employees and especially with regards to their employment.
Vanithamany held that those selected for the downsizing were not redundant nor surplus to requirements.
In June 2020, the company offered separation letters to 59 workers who were selected based on what the company termed as poor performers and those who had taken too many days off on sick leave.
They were offered compensation at a flat rate of 0.8 of their basic salary for each year served, while the collective agreement set out one month's salary for each year for those with up to 10 years' service, and 1.25 months' salary for those with more than 10 years.
The offer led to a protest by the Canon Opto Workers' Union who said they were not consulted as required.
Vanithamany said the employees may have been misled into accepting the separation scheme because of the lack of advice from the union. They may have decided differently if the union had been involved, she said.
'In the absence of the union involvement, the element of voluntariness is unacceptable,' she held.
Vanithamany heard the case with a panel comprising employees' representative Nor Adzlan Mohd Jazlan and employer's representative Ku Sim Ling.
Munjit Singh and Alfred Iruthiaraj from the Malaysian Trades Union Congress appeared for the union while David Tan Seng Keat defended the company.
When contacted, Munjit said the union will now be seeking compensation for the former employees.