09/05/2025
𝗖𝗔𝗦𝗘 𝗛𝗜𝗚𝗛𝗟𝗜𝗚𝗛𝗧 [02/2025]
MAZLI SAPAR v. TRADELIFT BHD [16/4-994/20]
Employment Law: Retrenchment Due to Financial Difficulties Ruled Lawful
[1] We recently succeeded in representing a company, the employer, in an unfair dismissal claim brought by a former employee at the Industrial Court.
[2] The employee had served nearly 10 years and was retrenched due to the company’s financial crisis. He alleged that the termination was unfair, claiming that the company was still operational and capable of paying salaries. However, we proved otherwise, that the company had ceased all business activities in 2019, and salaries had to be covered by a third party due to serious financial strain.
[3] The Court ruled that the retrenchment was done in good faith and was a legitimate business decision. It reaffirmed the principle that an employer has the prerogative to reorganize or downsize its operations, so long as it is done honestly and not as a disguise for wrongful dismissal.
[4] The Court referred to several landmark cases, including:-
- William Jacks & Co (M) Sdn Bhd v S Balasingam [2000] 7 MLJ 1
An employer has the right to organize their business in the manner they see fit, and as long as retrenchment is done bona fide (in good faith), the decision cannot be interfered with.
- Telekom Malaysia Kawasan Utara v Krishnan Kutty Sanguni Nair [2002] 3 CLJ 314
In industrial cases, the burden of proof is based on the balance of probabilities, employers must show reasonable justification for termination.
- Boey Sow Foong v Antah Drilling Sdn Bhd [1998] 7 MLRH 178
The fact that remaining staff absorbed the duties of a retrenched employee does not in itself make the retrenchment invalid if done due to genuine business contraction.
[5] Ultimately, the Court found that the company’s financial evidence was credible, multiple employees were affected (not just the claimant), and the decision to terminate was made without malice or victimisation.
[6] The Court dismissed the claim and ruled the retrenchment was lawful and justified.
This case highlights the importance of proper documentation and transparency in retrenchment exercises. Employers are encouraged to seek legal advice early when considering downsizing or restructuring.
Feel free to contact us for Employment Law consultation.
Messrs Syazwan Hasim & Azeel Eskandar