The Kuala Lumpur Industrial Court (the Court) in the case of Sivabalan a/l Poobalasingam v Kuwait Finance House (Malaysia) Berhad [1] has recently granted an award in favour of the Claimant, including punitive compensation in lieu of reinstatement, back wages and also his benefit of a higher than usual Employee Provident Fund (“EPF”) contribution by the Company.


The facts

Sivabalan a/l Poobalasingam (the “Claimant”) was employed by Kuwait Finance House (Malaysia) Berhad (the “Company”) and seconded to KFH Asset Management Sdn Bhd (KFHAM), a wholly owned subsidiary of the Company.

The Claimant held the role of Head of Business Development in KFHAM and was dismissed from employment on the basis that his position had been made redundant. The Claimant was the only employee in the Company who was dismissed at that material point in time.

Upon termination of the Claimant’s employment, another individual was then appointed to hold the role of Head of Business Development in KFHAM.

The issues

1. The Court had to decide whether the Claimant’s termination was with just cause or excuse, specifically:

(i) Whether the redundancy situation and consequent retrenchment was a colorable exercise by the Company to get rid of the Claimant; and

(ii) Whether the managerial power to reduce costs by dismissing the Claimant by reason of redundancy was exercised bona fide or for collateral reasons as decided by the Company.

If the Court finds that the Claimant’s termination was not with just cause and excuse, the Court must decide whether it has the power to grant exemplary or punitive compensation in the circumstances.

The decision

Deciding in favour of the Claimant, the Court found that the Company’s dismissal of the Claimant by reason of redundancy was irresponsible and clearly showed bad faith on the part of the Company and KFHAM. The alleged redundancy of the Claimant’s position was a flimsy excuse concocted to replace the Claimant with a candidate that KFHAM preferred. There was unrebutted evidence that the Claimant’s position remained, despite the fact the Company had claimed the position was itself redundant. Furthermore, no effort was made to provide the Claimant with alternative employment within the Company.

In the circumstances, the Court awarded two months’ salary for each completed year of service as punitive compensation in lieu of reinstatement, back wages and also granted the Claimant’s benefit of a higher than usual EPF contribution by the Company.

Comment

Whilst it is undoubtedly within a company’s prerogative to organise its business in the manner it thinks best, this case stresses the importance placed on an employer’s duty to act and make decisions in good faith. An employer whose decision is tainted with bad faith may find themselves having to contend with ‘punishment’ in the form of punitive compensation in favour of the employee.

[1]

 Industrial Court Case No. 7/4-459/13, Award No. 132 of 2016 dated 12 February 2016