INDUSTRIAL COURT OF MALAYSIA

CASE NO: 18/4-2139/07

JAMIL BIN ARSHAD AND 2 OTHERS

V.

CNA MANUFACTURING SDN. BHD.

AWARD NO: 1305 OF 2010

Before : Y.A. RAJENDRAN NAYAGAM

CHAIRMAN

Venue : Industrial Court Malaysia, Penang

Date of Reference : 6th September 2007

Dates of Mention : 26th December 2007; 30th January 2008; 29th February 2008;
24th March 2008; 30th May 2008; 21st November 2008;
22nd December 2008; 23rd January 2009; 22nd June 2009;
23rd June 2009; 23rd July 2009; 28th August 2009;
29th September 2009; 9th July 2010;

Dates of Hearing : 15th April 2010; 16th April 2010;

Dates of Oral Submission : 1st September 2010

Representation : Mr. Norhasham Bin Hj. Hassan of Messrs Norhasham &

Associates
for Jamil bin Arshad - 1st Claimant
Abdul Rashid bin Mat - 2nd Claimant
Hariza binti Harun - 3rd Claimant

Mr. Leow Tat Fah of Messrs TF Leow & Associates

for the Company

Reference:

This is a reference made under Section 20(3) of the Industrial Relations Act, 1967
arising out of the dismissal of 1st, 2nd and 3rd Claimants by CNA Manufacturing Sdn. Bhd. (“the
Company”).

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 AWARD

1. This is a Ministerial reference to the Industrial Court under section 20(3) of the
Industrial Relations Act 1967 made on 6th September 2007 for an award in respect of
the dismissal of 1st, 2nd and 3rd Claimants by CNA Manufacturing Sdn. Bhd. (“the
Company”).

2. Brief facts

The 1st Claimant commenced employment with the company as Assistant General
Manager of Production on 1st June 2003, the 2nd Claimant as Government Relation
Manager on 1st December 2003 and the 3rd Claimant as Assistant Manager of
Customer Service on 1st January 2004. The company is the business of producing car
seats.

In the last quarter of 2006, the company found that the demand for car seats had
declined tremendously due to a drop in car sales and an increase in competition from
other manufacturers. This resulted in a great decline in the company's business and as
such the company was forced to downsize its staff. For this purpose, the company in
2007 introduced the mutual separation package (hereinafter referred to as MSP). The
company contended that the MSP was voluntarily accepted by the claimants and on the
other hand, the claimants contended that it was thrust upon them and they had no
choice but to accept it.

In present case, the company contended that as the claimants had executed the MSP
voluntarily, their employment contracts had been terminated by mutual consent and
there had been no dismissal. The issue before this court is therefore whether there had
been a termination which had been mutually and freely agreed upon between the
parties.

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3. Issue

Whether the Claimants had entered into the mutual separation package with the
company voluntarily?

(i) 1st Claimant's case

On 17th April 2007, the 1st Claimant came to work at about 7.30am. At about 11.00am,
he was called to the company's meeting room. There he met the General Manager
(COW1) and Assistant General Manager. They told him that they had instructions from
their superiors to offer the MSP to him and that he had no choice but to accept it. The
claimant stated that on hearing this, he was shocked and felt weak. He was at his wits'
end and was thinking of the bleak future of his family. He said that he knew that he had
no choice in the matter as the directive came from the management and had to sign
the documents. In that state of mind, he signed the documents without reading them
and was immediately escorted out of the company's premises. Subsequently, the
company paid him compensation of RM31,058 and in May 2007, he lodged a
complaint with the Industrial Relations Department.

The claimant stated that he was 50 years of age then and could have worked until the
age of 55 years. His last drawn salary was RM7,623 per month and he has a wife and
4 children to support. He contended that the company had forced him into signing the
MSP.

2nd Claimant's case

On 13th April 2007 while at work at about 10.00am, he was called to the meeting room,
where he met the General Manager and Assistant General Manager. He was offered
the MSP and told that he had no choice but to accept it. He was in state of shock as he
had no notice of the MSP. As he was under tremendous pressure, he requested
permission to go and pray, as it was a Friday. After the prayers, he signed the

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documents and returned it to them. He contended that he signed the documents under
pressure, as the directive came from the top management. He said that he was then
51 years old and if he left his employment, it would have been difficult for him to seek
reemployment. He was then earning RM4,767 per month and has a wife and 4 children
to support. He was paid compensation of RM18,298 and subsequently, he lodged a
complaint with the Industrial Relations Department.

3rd Claimant's case

On 13th April 2007 at about 10.00am the claimant was called to the meeting room,
where she met the General Manager and Assistant General Manager. She was
informed by them that the management had directed her to accept the MSP. She said
that when she heard this, she was in a state of shock and kept quiet for awhile. She
then asked them ''why me'' and she was told that it was a ''directive.'' She said that she
was under tremendous pressure as she was being forced to leave her employment. As
her mind was disturbed, she did not understand the contents of the documents. She
again asked whether she could discuss the matter but she was told by the Assistant
General Manager ''walau tidak sign susah''. She then signed the documents. She was
then told that it was her last day at work. She said that she was crying all the way home
and did not tell her husband about it over the weekend, as he had just come on a
transfer to Penang, to be with her. Her last drawn salary was RM4,600. She received
compensation of RM10,123. In October 2008, she obtained alternative employment
with CIMB, with a salary of RM2000 a month.

Company's case

The company's General Manager testified as COW1. He stated that in 2006, there was
a decline in the demand for company's products and the company had to take several
cost cutting measures. One of which was the offer of mutual separation package based
on the redundancy of the staff. The company had identified the 3 claimants as
redundant and offered them the MSP.

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 He said that when the MSP was offered to the 1st Claimant, he wanted it to be
increased from 1 month to 1.5 months and when he told him that he had to refer it to
the Managing Director, the 1st Claimant waived the request and signed the documents
without any protest. When the offer was made to 2nd Claimant, he requested that the
period of 4 months he was with the holding company to be taken into account and it
was approved by the company. The 2nd Claimant then took the documents with him.
When he returned after the Friday prayers, he handed over the signed copies and left
the company. As regards the 3rd Claimant,she had requested that her allowances be
paid until the end of April instead of 13th April 2007. When the company agreed, she
signed the documents without any protest and left.

(ii) What is a Voluntary Separation Scheme?

When an employer is facing declining business, he may be forced to make a

substantial reduction in his workforce, this he may do either by way of retrenchment or
through the introduction of a voluntary separation scheme. Unlike in the case of
retrenchment, in the case of voluntary separation scheme, the employer issues a
circular inviting its employees to take advantage of an early retirement scheme. Under
the scheme, the employer normally offers an attractive retirement package, which is
better than the statutory minimum for retrenchment. When an employee makes an
application, he is said to make an offer of early retirement to the company, which is
subject to the acceptance by the company. When the company accepts the application
of the employee, the contract of employment is said to be terminated by mutual
consent and it is not considered as a dismissal. (see Birch & Another v Liverpool
University [1985] I CR 470).

Voluntariness

What is important to note in this type of scheme calling on the employees to apply for
early retirement is that by its very nature, it is done on a voluntary basis, without the
employee being forced into retirement. The court cannot in equity and good conscience

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 give effect to a purported mutual agreement which is not genuinely consensual, in
particular where the employee's volitional capacity had been impaired at the time he
was purported to have agreed to the mutual termination. On the other hand, an
agreement mutually and freely arrived at between the parties must be given effect to.
(see Timber Master Trading Sdn Bhd v Jane Wang Award 553 of 1994).

Burden

The onus is on the employee to establish by cogent evidence that he was forced into
signing the mutual separation agreement.

(iii) Evaluation

In the present case, the company's business started to fall from the middle of 2006 and
it had to take cost cutting measures. In April 2007, it introduced the mutual separation
package and had identified the 3 claimants as being surplus to their needs. However,
the manner in which it was implemented shows that it was treated as a redundancy
scheme. The company did not invite applications for early retirement from the
claimants instead the claimants were directed to the meeting room and there were
given the application by the General Manager and Assistant General Manager. When
questioned by the claimants on the offer of the MSP, the General Manager admitted in
cross-examination that he had told them that it “was a directive from above”. The
procedure adopted by the company certainly goes against the very grain of the
scheme, which is voluntary.

Further, the MSP exercise was concluded in one day. In the case of 1st Claimant, it was
on 17th April 2007 and in respect of 2nd and 3rd Claimants, it was on 13th April 2007. This
supports the Claimants' contention that they did not know about the MSP until on the
said day, when they were given the MSP application forms. Normally, when a mutual
separation package is introduced by the the company, the compensation for loss of
employment and the rate of payment is announced by the company, to encourage the

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employees to take up the offer and a limited period of time is given for the employee to
consider the matter and to make the application and if accepted by the company, a
further limited period of time is given for the employee to leave the organisation. As can
be seen from the facts of the present case, the claimants were not informed of the
compensation in advance and not given any time to consider the scheme. In point of
fact they were not invited to make the application to the company instead they were
called to the meeting room and told to sign the acceptance letters. Then they were
booted out of the company, as soon they put their signatures on the documents.

Further, a perusal of the MSP documentation shows that the company had confused
the MSP scheme with a retrenchment scheme. The intention of the company was to
secure the early retirement of the claimants by offering the MSP. As stated above, this
is normally done by the company inviting applications from its employees. But in the
present case, the company made the offer directly to the claimants, thereby infringing
the principle of voluntariness. This goes to support the claimants' contention that they
no intention of retiring early and that it had been thrust upon them.

The claimants contended that they had no intention of bringing their employment to an
end, as they had young families to support and had no alternative employment. They
were certainly not enticed by the compensation offered by the company, as it was a
paltry sum compared to the salaries they were earning. The only reason for signing the
MSP documents is that they had no choice in the matter as the were told that it was the
decision of the company's management. In this regard, the claimants being employees
were not on equal footing with the top management of the company and knew that it
would have been futile for them to have refused to sign, as they could not continue
working with the company. As such,they had no choice but to sign the documents to
obtain the best payment they can secure and to complain later, as was stated in the
case of Nasaruddin bin Hj. Abu Bakar v Perwira Ericson Sdn. Bhd. & Anor [1994] 1
LNS 96. Finally, the company's submission that the claimants had accepted the MSP
knowing fully well the declining financial position of the company, was not put to the

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 claimants and as such their contention that they were forced to sign the said MSP
documents has to be accepted.

In conclusion, the company introduced the MSP scheme in order to reduce its staff but
in order for it to be binding, it must be shown that the claimants had freely and
voluntarily entered into the contract. The claimants have shown by cogent evidence that
their volitional capacity had been impaired and that the MSP was implemented like a
retrenchment scheme. As such, the court cannot in equity and good conscience give
effect to the purported mutual MSP agreement, which is not genuinely consensual.

4. Finding

For the reasons given, it is the finding of this court that the employment contracts of the
claimants were not terminated by mutual consent and as such the claimants have been
dismissed. Further, the company has failed to establish that the claimants have been
dismissed for just cause or excuse.

5. Remedy

Compensation

In the interests of industrial harmony, compensation is the appropriate remedy in the

instant case. In assessing compensation, the court will award backwages for the period
the claimant was unemployed subject to a maximum of (24) months and compensation
in lieu of reinstatement of one month's wages for each completed year of service.
Accordingly, the court makes the following award;

1st Claimant

Years of service - 3 years 10 months

Last drawn salary - RM7,623 per month

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Backwages

RM7,623 X 24 months RM182,952

Compensation in lieu of reinstatement

RM7,623 x 3 months RM 22,869

----------------
RM205,821

Less compensation RM 31,058 = RM174,763

2nd Claimant

Years of service - 3 years 8 months

Last drawn salary - RM4,617 per month

Backwages

RM4,617 X 24 months RM110,808

Compensation in lieu of reinstatement

RM4,617 X 3 months RM 13,851

---------------
RM124,659

Less compensation RM 18,298 = RM106,361

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3rd Claimant

Years of service - 2 years 3 months

Last drawn salary - RM4000 per month

Unemployed for (17) months.

Post dismissal earnings – RM2000 per month

Backwages

RM4000 X 24 months RM96,000

Less post dismissal earnings @ 10% RM 9,600

--------------
RM86,400

Compensation in lieu of reinstatement

RM4000 X 2 months RM 8,000

-------------
RM94,400

Less compensation RM10,123 = RM84,277

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6. Order

It is hereby ordered that the company do pay the 1st, 2nd, and 3rd claimants the sums

stipulated above as compensation through their solicitors Messrs Norhasham &

Associates within (14) days from the service of this award.

HANDED DOWN AND DATED THIS 11TH DAY OF OCTOBER 2010.

Signed
(RAJENDRAN NAYAGAM)
CHAIRMAN
INDUSTRIAL COURT

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