Embrace the storms of the Movement Control Order (MCO)

Background

On 25^th March 2020, the Prime Minister announced the extension of the MCO. Subject to further changes, the entire period of the MCO has been extended from the initial 14 days to 28 days. In light of the extension, what can be done to mitigate the impact of the MCO on corporate entities, and how can they prepare for the challenges after the MCO? In this article, we discuss how to prepare for the difficult times ahead, particularly in human resource management.

During MCO

The pandemic outbreak is unprecedented in Malaysia. It is hence a challenge to our current legal framework. Under these circumstances, the guidelines issued by the Ministry of Human Resources (MoHR) are helpful.

Unless expressly revoked or replaced by new guidelines, one has to assume that the existing guidelines continue to apply throughout the MCO period. The guidelines are available on the MoHR website. A write-up on the guidelines can also be found on our website.

It is interesting to see how other countries deal with employment issues during the restrictions period. The table below provides an overview of the interim measures in place in some affected countries:

Restrictions in place until April 3

The impact of the MCO is expected to hit businesses’ bottom lines. Thus, on 27^th March 2020, the Prime Minister announced an economic stimulus package known as Package Prihatin, or the Caring Package, valued at RM250 billion, which is expected to benefit the Rakyat.

In light of the Caring Package, the Prime Minister appealed to employers not to dismiss workers. The Government put in place, among other measures, a wage subsidy program. This program is applicable to employers whose income has been reduced by more than 50% since 1^st January 2020. Under this program, the Government will pay RM600 per month for a period of 3 months in relation to employees who earn below RM4,000 per month and are registered under the Employment Insurance Scheme, provided that the employers agree not to terminate them or instruct them to take unpaid leave for a period of 3 months after the execution of the program. Employers are not permitted to reduce employees’ monthly salary.

The Caring Package received some criticism from employers, with some doubting the extent to which the economic stimulus package could ease their burden.

Post MCO

What if the employer still experiences substantial loss in business, which then leads to a surplus of manpower? Under this pressure, cost-cutting measures are almost inevitable. There are, however, some safeguards under the current legal system before the employer can resort to retrenchment.

What is retrenchment and when can it happen?

Retrenchment refers to termination by the employer of workers found to be surplus to requirements. There is a surplus of workers, or redundancy, when a worker’s job function ceases to exist.

Appropriate measures before retrenchment

Under the Code of Conduct for Industrial Harmony (“Code”), before the employer takes the drastic measure of retrenchment, the employer should take positive steps to avert or minimize reductions in workforce by adopting appropriate measures such as:

1. Limitation on recruitment
2. Restriction of overtime work
3. Restriction of work on weekly days of rest
4. Reduction in number of shifts or days worked per week
5. Reduction in the number of hours of work
6. Re-training and/or transfer to other departments or work areas

The Code also requires consultation with the workers or their trade union representatives on the intended reduction of the workforce size.

Further measures before retrenchment

If, having taken appropriate measures, retrenchment is still necessary, the employer should take the following further measures:

1. Give a warning as early as practicable to the workers concerned;
2. Introduce schemes for voluntary retrenchment and retirement, and for payment of redundancy and retirement benefits;
3. Retire workers who are beyond their normal retiring age;
4. Assist, in cooperation with the MoHR, workers to find employment outside the undertaking;
5. Spread termination of employment over a longer period;
6. Ensure that no such announcement is made before workers and their representatives or trade union have been informed.

Regard must also be had to the generally accepted principle of retrenchment, LIFO (last in, first out), when the employer decides to embark on a retrenchment exercise.

Re-engagement after retrenchment

After retrenchment, the employer should give priority of engagement or re-engagement to the retrenched employees when hiring workers.

Industrial jurisprudence of retrenchment

Failure to adhere to the Code cannot vitiate a genuine retrenchment unless the collective agreement between the employer and employees requires adherence to the Code. Nevertheless, it serves as a guideline and has been recognized by the courts.

Despite the MCO, when an unfair dismissal representation is made to the Industrial Relations Office, it is ultimately the Industrial Court that decides whether there is a genuine situation of redundancy leading to retrenchment.

It is well-settled that the employer is entitled to organize their business as they consider best; nevertheless, managerial power must be exercised in good faith. Thus, retrenchment must be justifiably grounded, such as in cases of acute financial loss or downsizing of the workforce.

Should you have any doubt regarding redundancy and/or retrenchment benefits, please feel free to contact us.

Your key contacts:

Gan Khong Aik
Partner
Gan Partnership
E: khongaik@ganlaw.my

Kang Mei Yee
Senior Associate
Gan Partnership
E: meiyee@ganlaw.com

DISCLAIMER: This article is for general information only and should not be relied upon as legal advice. The position stated herein is as at the date of publication on 31^st March 2020. For any enquiries on this article, please contact Gan Khong Aik (khongaik@ganlaw.my) or Kang Mei Yee (meiyee@ganlaw.my).