Reinstatement is an Impossibility: Can the Industrial Court Order Compensation in Lieu of Reinstatement?
On 17 September 2021, the Federal Court revisited the legal principles held in the landmark Federal Court decision of Unilever (M) Holdings Sdn Bhd v So Lai & Anor  2 ILR 265 with regards to awards of compensation in lieu of reinstatement.
The case of Goh Hauh Chuan v Fairchild Semiconductor (M) Sdn Bhd [Civil Appeal No. 01(f)-22-09/2020(P)] (Federal Court) highlights the principle that an employee who has been wrongfully dismissed is not entitled to compensation in lieu of reinstatement when the company had already been shut down. It can be surmised that the principles in Unilever can be extended to encompass situations where reinstatement is not possible due to the closure of operations.
The Unilever Quandary
The 2015 Federal Court decision in Unilever changed the landscape of awards by the Industrial Court. The court held that even in situations where the Industrial Court may have found that an employee had been unfairly dismissed, the Industrial Court nonetheless cannot grant an award of compensation in lieu of reinstatement in cases where the employee had exceeded the retirement age at the time the award was handed down.
The legal principle that was established in Unilever was that since reinstatement is impossible (due to the employee having exceeded retirement age), it follows that compensation in lieu of reinstatement likewise cannot be awarded.
Goh Hauh Chuan v Fairchild Semiconductor (M) Sdn Bhd
The case of Goh Hauh Chuan sought to test whether the principle laid down in Unilever may extend also to a situation where reinstatement is impossible due to the closure of the business.
Briefly, the case of Goh Hauh Chuan is centred on the dismissal of Goh Hauh Chuan (“the Claimant”) by Fairchild Semiconductor (Malaysia) Sdn Bhd (“the Company”). The Claimant had worked for the Company for 26 years. Disasstified with his dismissal, he filed a representation to the Director General for Industrial Relations seeking an order for reinstatement to his former position. The matter was subsequently referred to the Industrial Court.
Midway through the proceedings at the Industrial Court, the Company ceased its business operations in Malaysia. Subsequently, the Industrial Court found the dismissal of the Claimant to be without just cause and excuse. The court found in favour of the Claimant and awarded backwages and compensation in lieu of reinstatement (“the Award”), despite the Claimant not being able to be reinstated due to the closure of operations.
Aggrieved with the Award, the Company filed a judicial review application to the High Court seeking an order of certiorari to quash the Award. The High Court agreed with the Company’s argument, amongst others, that as reinstatement was no longer possible due to the closure of the Company’s operations, thus compensation in lieu of reinstatement likewise cannot be awarded. The High Court quashed the Award of the Industrial Court.
On appeal by the Claimant, the High Court’s decision was affirmed by the Court of Appeal which unanimously held that there is no merit in the appeal. The Claimant subsequently sought leave to appeal to the Federal Court.
Issues under consideration at the Federal Court
The Federal Court granted leave to appeal on the following questions of law posed by the Claimant:
- In reference under Section 20(1) of the Industrial Relations Act 1967, whether a workman, having been found to have been dismissed without just cause or excuse by the Industrial Court, must further proof that the employer is capable of reinstating him before he can avail himself of the remedy of compensation in lieu of reinstatement?
- Further to the pronouncement of the Federal Court in Unilever, whether a workman is only required to show that he is ready, willing and able to seek reinstatement before he is entitled to compensation in lieu of reinstatement?
- Whether the interpretation of law further to Unilever is that a solvent employer who closes down its business operations and can no longer offer reinstatement to the workman, can escape/ avoid paying compensation in lieu of reinstatement?
The Federal Court unanimously dismissed the appeal by the Claimant. In delivering its decision, the Federal Court, amongst others, noted that the questions posed by the Claimant were academic in nature and did not require the answers of the Federal Court.
With the dismissal of the Claimant’s appeal in Goh Hauh Chuan, Unilever remains good law.
It can be argued that the principles laid down in the case of Unilever have now been extended to encompass situations where reinstatement is not possible due to the cessation of operations of the employer, in addition to the situation of an employee exceeding the retirement age.
It is noteworthy that recent Industrial Court decisions have similarly adopted the legal principles in Unilever for situations of closure of business operations, which are increasingly common in light of the challenges presented to businesses due to the Covid-19 pandemic.
The Company, Fairchild Semiconductor (M) Sdn Bhd was represented by our Partner, Chuah Jo-Shua and Associate, Chong Siau Fong. ZICO alumnus, Dato’ Thavalingam C. Thavarajah, acted as counsel.
This alert is for general information only and is not a substitute for legal advice.