Introduction
Reinstatement is the primary remedy to be sought by an individual when he lodges a complaint of unfair dismissal at the Industrial Relations Department, pursuant to S.20(1) of the Industrial Relations Act (IRA) 1967. Until recently, a prayer for reinstatement has always been the foremost prayer in the claimant’s Statement of Case when his case is being heard by the Industrial Court.
An order for reinstatement, however, is rarely made by the Court. One of the factors, is the issue of mutual trust and confidence between the company and the claimant which the Court regularly views to have been eroded by the company’s action in dismissing the claimant. In the eyes of the Court, if both the company and the claimant have lost trust and confidence in each other, an attempt to reinstate the employee would be futile as the employer-employee relationship may not be sustainable.
Sometimes, however, reinstatement is genuinely pleaded, particularly by long-serving employees who have lost a significant amount of employee benefits given by the company after their dismissal. Additionally, in this post-COVID times, jobs are harder to come by, and security of tenure is more valued than monetary compensation.
This paper re-looks at the relief of reinstatement from the perspective of mutual trust and confidence.
Unlawful Dismissal: Procedures for Claim
S.20 IRA 1967 allows a non-unionised worker to file a complaint with the Industrial Relations (IR) Department if he believed he had been unfairly dismissed within 60 days of the dismissal and request for reinstatement. A unionised worker may lodge a complaint via his union representative within the same time frame.
The remedy of reinstatement is the primary relief sought in unfair dismissal claims. This is because of the wordings in S. 20(1) of the IRA 1967:
“Where a workman, irrespective of whether he is a member of a trade union of workmen or otherwise, considers that he has been dismissed without just cause or excuse by his employer, he may make representations in writing to the Director General to be reinstated in his former employment; the representations may be filed at the office of the Director General nearest to the place of employment from which the workman was dismissed.”
This has led some employers to take the position that where the dismissed employee does not want reinstatement, the Industrial Court cannot hear the unfair dismissal claim.
This perception is no longer valid however, after the Court of Appeal in Sanbos (Malaysia) Sdn Bhd v Gan Soon Huat1 held that the Industrial Court still has jurisdiction to determine a complaint of unfair dismissal under S.20(3) IRA 1967 and Industrial Court Rules 1967 even when the claimant does not plead reinstatement in his Statement of Case.
The Court of Appeal applied the view of the High Court’s decision in the Borneo Post Sdn Bhd v Margaret Wong2 which held that the requirement to plead reinstatement as a remedy is only material at the stage of making a representation to the IR Department under S.20(1), and once the case is referred to the Industrial Court, there is no longer a specific requirement in the Act for the employee to plead the remedy of reinstatement.
On receiving the complaint, the IR Department will arrange for a settlement between parties through conciliation. If the conciliation procedures are not successful, the dispute will be referred to the Industrial Court.
The Realities of Reinstatement
Statistics show that from January to June 2021, a total of 30,180 workers have been terminated from service, 17,449 of whom were involved in retrenchment exercises and 12,731 partook in voluntary or mutual separation schemes3.
An earlier report by the Institute of Labour Market Information and Analysis (ILMIA) in 20174 revealed that the top three reasons for termination of service are retrenchment (8,371 cases), misconduct (3,281) and termination simpliciter (2,111 cases). The same report also stated that the top three claims for reinstatement are from dismissals due to misconduct (1,157 cases), retrenchment (707 cases) and termination simpliciter (677 cases).
It is usually the case that a claimant would plead reinstatement and maintain this position throughout the entire duration of trial in the hope that that the Industrial Court will deem it impracticable and offer monetary compensation as an alternative. There have also been occasions where reinstatement is intentionally pleaded because the employee genuinely wanted to come back to work for specific reasons.
In 2015 Universiti Putra Malaysia (UPM) carried out a study entitled “Moral Effect of Workers After Reinstatement”5 with the two-pronged aim to investigate whether a complaint under S.20 IRA 1967 is genuinely made for reinstatement or just to get compensation from the employer; and, if the plea is “genuine”, to investigate how long a reinstated employee can work with the employer the second time around.
The findings of this research, based on the feedback of eight (8) respondents, the period of service with their respective employers during their “second wind” were only between two (2) months to a year and 8 months. The respondents gave the following responses:
· “Kita dah berkhidmat lama, jika kita dibuang kerja tanpa alasan yang munasabah dari majikan, seharusnya kita minta balik bekerja kerana mungkin lebih sukar untuk dapat kerja di tempat lain”;
· “Saya sebenarnya dah menyampah nak kerja semula. Cuma saya nak ajar majikan ni dan dapatkan sedikit pampasan. Itu sahaja”;
· “Memang beza la cik..bos saya pun kurang mesra..rakan-rakan lain pun macam ada yang menyokong..tapi bos memang kurang mesra la..tambahan dengan pekerja bawahan. Saya ni dulu banyak perjuangkan hak pekerja tu yang majikan aim dan tamatkan saya……..tanggungjawab saya dikurangkan sedikit.. seolah-olah dipinggirkan.. jadi rasa tak puas hati juga..”;
· “Suasana agak tidak selesa …. Bos agak garang dan berat sebelah. Layanan agak dingin, rakan sekerja pun tak nak bekerjasama. Majikan tidak boleh terima pandangan kita.”
Only three respondents responded somewhat positively, but they too did not stay long. The respondents requested to be reinstated because they felt their job was important to them. As one of them said:
“Saya dah bekerja 10 tahun. Sekarang lepas diambil semula saya dah kerja 11 bulan. Saya hanya buat kerja saya sahaja. Lagipun kawan-kawan ok dan rumah pun dekat. Saya memang tak terfikir nak cari kerja lain. Biarlah dengan apa yang dah berlaku.”
Based the findings of this study, it can be concluded that many of the respondents were genuine when they used S.20 to claim for the reinstatement. It can be surmised that this could be because they felt it would be difficult to get another job, the new job could be far from their homes, or to start from the beginning again with a new employer would be challenging.
The study also found that if the claims were genuine, the respondents stayed longer, if the claims were not genuine, they stayed for a very short time because their actual intention was to obtain compensation or some semblance of justice from the employers who terminated them. Some also leave because they receive differential treatment post-reinstatement, compared to before they were terminated.
The Conundrum with Deficit of Trust
There is little literature on the antecedent factors of the rarity of the order of reinstatement by the Industrial Court. When the Court Chairpersons cite the loss of mutual trust and confidence between parties as the grounds for preferring to make an order for compensation in lieu of reinstatement over an actual order for reinstatement, the grounds or raison d’être for the decision is hardly ever discussed.
In Novartis Corporation (Malaysia) Sdn Bhd v. Mahkamah Perusahaan Malaysia & 2 Ors6, the Court of Appeal partially allowed an appeal by the company in respect of two senior-level employees, who had been reinstated to their former employment after succeeding in their claims of unfair dismissal at the Industrial Court. The orders of reinstatement had been subsequently maintained by the High Court.
While maintaining their dismissals to be without just cause or excuse, the Court of Appeal deemed that the Industrial Court had erred in ordering the claimants to be reinstated in light of, inter alia, the damaged trust and confidence between them and the company.
In overturning the orders of reinstatement, the Court of Appeal expressly endorsed the position taken in Hong Leong Bank Bhd v Phung Tze Thiam John Phung7, where Md Raus Sharif JCA (as the Chief Justice then was) observed as follows:
“The law on whether to grant reinstatement has been authoritatively stated by the Supreme Court in Kumpulan Perangsang Selangor Bhd v. Zaid Mohd Noh [1997] 2 CLJ 11; [1997] 1 MLJ 789. In that case, the Supreme Court expounded the principle relating to the remedy of reinstatement and declared that the following factors are required to be taken into account when considering whether to order reinstatement. They are:
(i) the past record of employee;
(ii) the nature of his alleged lapse;
(iii) the conduct of the workman i.e. whether he had contributed to his own dismissal;
(iv) nature of relations between the employer and the employee;
(v) the nature of duties performed by the employee; and
(vi) the nature of industrial establishment.”
The claimants in Novartis held senior positions as the Chief Finance Officer and the Head of Marketing and Sales Operations, and it was apparent that the relationship between the parties had soured following the disciplinary process which had led to their dismissal, and the prolonged litigation between them (including a separate civil suit).
As the Court of Appeal in John Phung’s case went on to hold:
“No doubt reinstatement is the usual remedy that is awarded in industrial law. But there may be circumstances where the reinstatement is inappropriate. The present case is such a case.
The respondent held a reasonable high-ranking position. He was the head of the appellant’s branch in Tawau. On the facts of this case, mutual trust and confidence is lacking between the parties. There is no useful purpose, for reason of industrial harmony to thrust the respondent upon the appellant. More so in this case, the respondent had left the services of the appellant for five and a half years when the order of reinstatement was made by the High Court. Taking into account all the facts and circumstances of the case, we are of the view that the proper remedy in this case is compensation in lieu of reinstatement as ordered by the Industrial Court.”
Premised on the above decision, the Court of Appeal concluded that the order of reinstatement was inappropriate, and quashed the Industrial Court Award to that extent.
The question here is, has the Court of Appeal considered whether industrial harmony, equity and good conscience are being served in making its orders? The question is whether reinstatement should be denied due to a loss of trust and confidence is largely objective, although trust and confidence are subjective concepts.
The author is of the view that loss of trust and confidence is neither necessary nor sufficient for a denial of reinstatement, without careful weighing of the merits of the case. Even if the employer establishes that there has been a loss of trust and confidence, it does not necessarily follow that reinstatement must be summarily denied, without considering the manageability and workability of the employment relationship post-reinstatement. Whether one party vests trust and confidence in the other depends entirely on one’s actual mental attitude towards the other.
In the rare occasions where the courts deem it appropriate to make an order of reinstatement, the issue of mutual trust is often deliberated carefully vis-à-vis the other merits of the case, instead of just a fleeting summary treatment premised on its absence.
Kamarulzaman bin Junuh dan Padiberas Nasional Berhad (BERNAS)8 may have a few useful lessons to impart. The case concerned an employee of BERNAS who had served the company for 30 years before he was dismissed. His had a clean disciplinary record prior to his dismissal. He was 53 years old at the time of dismissal, with less than a decade to go before his retirement. He lost his retirement benefits upon his dismissal and specifically prayed for reinstatement so he could continue receiving them.
The Industrial Court in making the order for reinstatement held:
“Berhubung dengan relif-relif yang dipinta oleh Yang Menuntut, Yang Menuntut memberi keterangan semasa perbicaraan bahawa beliau pada masa tersebut tidak bekerja dan hanya menolong isterinya berniaga. Yang Menuntut juga apabila ditanya oleh peguam bijaksana bagi Responden, menyatakan hasrat beliau untuk kembali bekerja dengan Responden.
Yang Menuntut semasa dibuang kerja hanya berumur lebih kurang 53 tahun. Akan tetapi Yang Menuntut telahpun pada masa tersebut berkhidmat untuk Responden untuk tempoh lebih kurang 24 tahun. Sekiranya mengambilkira tempoh beliau bersama dengan LPN iaitu sebelum penswataan, beliau telah berkhidmat untuk tempoh hampir 30 tahun. Yang Menuntut sememangnya merupakan pekerja lama Responden. COW1 telah mengesahkan bahawa sepanjang tempoh perkhidmatan Yang Menuntut, beliau tidak pernah disabitkan dengan kesalahan atau salahlaku yang lain, melainkan daripada tuduhan-tuduhan dalam kes ini.
COW1 juga mengesahkan bahawa akibat daripada pembuangan kerja tersebut, Yang Menuntut telah dinafikan faedah persaraan yang bakal diperolehi oleh Yang Menuntut sekiranya beliau bekerja sehingga umur persaraan mandatori yang ditetapkan oleh undang-undang iaitu 60 tahun. Yang Menuntut juga mengesahkan bahawa semasa dibuang kerja beliau langsung tidak memperolehi faedah persaraan tersebut.
Atas sebab-sebab yang dinyatakan di atas, Mahkamah berpendapat, ini merupakan satu kes yang yang padan dan sesuai (“fit and proper”) untuk pengembalian semula ke jawatan Yang Menuntut sebelum beliau ditamatkan perkhidmatan oleh Responden.…Justeru itu, Mahkamah dengan ini memerintahkan seperti berikut:
… Bahawa Yang Menuntut dikembali semula ke jawatan beliau di syarikat Responden berkuatkuasa pada 01.03.2020 dengan gaji pokok yang sama dan berdasarkan terma-terma perkhidmatan yang terpakai sebelum Yang Menuntut dibuang kerja. Perkhidmatan Yang Menuntut hendaklah dianggap sebagai berterusan dari tarikh beliau mula berkhidmat untuk Responden iaitu pada 28.06.1994, tanpa sebarang hentian dalam perkhidmatan dari tarikh beliau dibuang kerja sehinggalah tarikh pengembalian semula jawatan ini berkuatkuasa.”
The above excerpt from the grounds of the award clearly shows the careful thought process of the Chairman in arriving at his decision to reinstate, leaving no stone unturned in his scrutiny of the submission of the claimant in order to preserve the norms of equity and industrial harmony.
The Australian landmark case of Perkins v Grace Worldwide (Aust) Pty Ltd9 qualified this position by considering that an irrational or unsound loss of trust and confidence is of no relevance to the question of reinstatement. The Court held in Perkins:
“…[t]rust and confidence are concepts of degree. It is rare for any human being to have total trust in another. What is important in the employment relationship is that there be sufficient trust to make the relationship viable and productive. Whether that standard is reached in any particular case must depend upon the circumstances of the particular case.”
In Zhao v University of Technology10 the Fair Work Commission (FWC) decided that loss of mutual trust and confidence should not be a barrier to the claimant’s reinstatement.
Per Sams DP:
“There was little evidence, or even persuasive opinion, from the University’s witnesses that the employment relationship between Dr Zhao and the University is irretrievably broken, or so untenable as to serve as an impediment to her reinstatement. Indeed, I would go further and state that I consider Dr Zhao will continue to make a significant and positive contribution to the UTS Business School, particularly in its teaching focus. There was no evidence that Dr Zhao’s reinstatement would damage, or adversely impact the University’s reputation, or on its Australian and international rankings.
There is no evidence that Dr Zhao was an uncooperative or belligerent employee. Nor was there any evidence that she was anything but a dedicated, hard-working team player who had good and positive relationships with her supervisors and colleagues. It is appropriate that she be reinstated, and I intend to do so.
Section 391(3) of the Act provides that if the Commission makes an order for reinstatement and considers it appropriate to do so, the Commission may also make any order to cause the employer to pay to the applicant an amount for the remuneration lost, or likely to have been lost by the applicant because of the dismissal.
…In all the circumstances of this matter, I consider an order for the payment of lost remuneration is appropriate in this case…”
The year after, however, in Moszko v Simplot Australia Pty Ltd11 the FWC did not make an award for reinstatement even when he found that his dismissal was harsh, unfair, and unreasonable. The Commissioner reasoned that the dismissal would have ongoing effects on the relationship between the feeder and the processing plant. The Fair Work Commissioner felt that the processing plant had lost trust in the feeder. The loss of trust, when considered alongside the feeder’s prior work history will make it harder for the parties to re-establish a healthy working relationship.
The problem with the decision in Moszko is, while it is true that loss of trust and confidence is one criterion in determining whether reinstatement is appropriate, it is not the only criterion. Each case must be decided on its own fact and any allegation of loss of trust and confidence must be soundly and rationally based. In this case the FWC’s decision is seen as defective because:
1. The factual bases for the feeder’s dismissal were deemed unresolved. The issue of whether the feeder did or did not commit a misconduct is still an unresolved fact and cannot then be a sound or rational basis for the employer to lose trust and confidence in the feeder. The processing plant may have suspicions about the feeder’s actions but suspicions are not sound or rational enough bases to find that there has been a loss of trust and confidence; and
2. The finding by the Commissioner is that if reinstated, the processing plant would more closely scrutinise the feeder and his work is not supported by any evidence. None of the witnesses called to give evidence for the processing plant gave evidence that they had lost trust and confidence in the feeder as an employee or as a colleague.
In JP Morgan12 a tribunal ordered that a trader who had been unfairly dismissed in the UK should be re-engaged in Hong Kong and awarded him a sum of over £1.5 million to compensate him for lost of salary and benefits from the date of his dismissal to his re-engagement.
In this rare “hybrid” reinstatement-reengagement order (S.112 of the Employment Rights Act 1996 allows for reinstatement and re-engagement orders to be made by the Employment Tribunal, which in this case was combined by the judgment so as not to ruffle feathers amongst the rest of the workforce), Bradley Jones won back a similar job to his $675,000-a-year London position at JPMorgan after a judge found the investment bank unfairly dismissed him in order to placate regulators in a market-spoofing probe.
This case shows that although the misconduct may be have been committed by the claimant, it may not be sufficiently serious to dismiss fairly. That may also not be a bar to re-engaging the employee in another role. In deciding whether to make the order, the judge took into account that, if re-engagement was not awarded, Mr Jones would never work in a regulated role in the financial services sector again.
He said that this was partly because, at least within the UK, the bank’s approach to providing a regulatory reference amounted to “blacklisting” Mr Jones from any regulated employment in the sector meaning he would have massive difficulties in obtaining employment inside and outside the UK given that he would not have a positive reference. Mr Jones would also be known as someone willing to take an “unscrupulous employer” to a Tribunal. The judge said that as a result, re-engagement was the only way that the unfair dismissal could be “made right”.
In A Banker v A Bank13 a banker was dismissed for gross misconduct and brought a claim for unfair dismissal. The adjudicator in this case decided that the unfair dismissal claim succeeded due to the imperfections and flaws in the bank’s disciplinary procedure which led to the dismissal. The banker prayed for re-instatement, and the adjudicator agreed that reinstatement was possible as the banker was a popular employee whose performance appraisals were good and was a good team player.
The bank, however, argued that re-instatement was not appropriate as it could lead to a poor relationship between the parties in the future, there would inevitably be disharmony, and the relationship of mutual trust and confidence between the parties was shattered. The adjudicator did not agree.
The adjudicator had regard for the fact that the banker operated in a strictly regulated environment and industry and a dismissal would possibly be fatal to obtaining alternative employment in such an industry, given the relatively limited options. For this reason, the adjudicator ordered that the employee be re-instated as it was ‘just and equitable in this case’.
Other schools of thought14 discouraging reinstatement of dismissed employees centre on the cost and operational disruptions, as well as psychological disadvantages, which the reinstatement order inflicts on the employer.
That is, the reinstated employee may well have grown in status because his/her colleagues may see him/her as a ‘hero’ for having stood up to the employer or for having ‘beaten the system’. The employer may be hesitant to discipline him/her or to take any other controlling type action for fear of losing another court case. This could be expensive, time consuming and humiliating, not to mention stirring up employee cynicism amongst the workforce – raising issues of deficit of mutual trust of a different breed.
Points for the Industrial Court to Ponder
The intention of creating IRA 1967 is to protect employees from unfair treatment, particularly in relation to the termination of their employment. The Industrial Court’s discretion to make reinstatement order as a relief for unfair dismissal is conferred in broad terms, making it particularly important to pay attention to the subject matter, scope and purposes of the IRA in deciding how the decision of whether to award reinstatement should be made. Legal norms are founded on those purposes, and the possibility of incongruity with those norms must be addressed.
Legal norms have always been important in the law of unfair dismissal. The awards by the Industrial Court are to comply with the following requirements under the IRA:
S. 30 (4) In making its award in respect of a trade dispute, the Court shall have regard to the public interest, the financial implications and the effect of the award on the economy of the country, and on the industry concerned, and also to the probable effect in related or similar industries.
(5) The Court shall act according to equity, good conscience and the substantial merits of the case without regard to technicalities and legal form.
The spirit of creating reinstatement as a primary statutory relief exclusively by the Industrial Court is largely guided by considerations of equity and industrial harmony. A legal norm makes trust and confidence relevant to the question of inappropriateness in the first place.
The author acknowledges the risk of an unworkable “second chance” employer-employee relationship. How then, can this be managed? The author finds the answer in the work of de Clark15 which in the author’s view is still relevant and sound after 53 years. De Clark in his celebrated article “Unfair Dismissal and Reinstatement” opined:
“…it is hardly possible to say that it would not be practicable to provide a remedy of reinstatement in the forthcoming legislation. Of course, it is true that in many cases the workman who has been dismissed will not want to go back to his former employer but would prefer to receive an award of compensation. In the society we live in it is not necessary to make reinstatement the only remedy, and it would be reasonable to allow the worker the option of compensation in these cases. It is also true that in small enterprises there may well be genuine personal difficulties which might make an order of reinstatement unworkable. The best solution in this case would probably be to allow the employer to make a fresh application to the tribunal after a period of, say, four weeks and ask for the discharge of the order, which could be granted if he satisfied the tribunal that genuine efforts had been made to overcome the difficulties without success; an order for the appropriate sum of compensation would then be made.”
De Clark goes on to say about the working environment post-reinstatement:
“No doubt in such a situation there are considerable tensions anyway; but there is certainly no evidence that the reinstatement is ineffective or that the resentment of employers or foremen is such as to make it impossible for the enterprise to be carried on afterwards. But job security can be important for white collar and professional workers also. Relatively senior members of a company’s office staff may suddenly find that they are no longer wanted after a merger; and they are not necessarily always eligible for a (redundancy) payment…
…No one is suggesting that reinstatement can be expected to be effective every time, nor that even if it were it would be a panacea for all the ills of industrial relations. But what experience there is certainly does not bear out the gloomy forecasts of some traditionally minded lawyers and some employers’ representatives.”
Given that there is a genuine intention of parties to give a second shot at preserving the employment relationship, that shreds of mutual trust can still be salvaged, but only constrained by the unavailability of the exact job, perhaps an answer would be to consider re-engagement as an alternative remedy besides monetary compensation.
It is to also help the claimant where reinstatement is not pleaded but where the Court thinks it fit for the claimant’s job to be restored. Re-engagement is a statutory remedy for unfair dismissal in the UK, under S. 112 of the Employment Rights Act 1996. Perhaps in due course the Industrial Relations Act 1967 could be revised to include a similar relief of re-engagement to help regain employment opportunities for dismissed employees, particularly in larger corporations, which has a number of separate and diversified business divisions, and where the employee could return to work without causing too many “ruffles”.
Conclusion
There should not be an incongruity between the what the law intends, and what is conducive to preserve harmonious industrial relations. A law firm in the UK16 is of the view that before tribunal-led unfair dismissal system was in place, many workplaces had internal procedures for resolving dismissal claims, and reinstatement rates were as high as 33%. Compare this with today’s employment tribunal figures and we see less than 1% of unfair dismissal cases that result in reinstatement. The assumption is that this is connected to a shift in how companies and management hierarchies have changed over the decades, perhaps not for the better.
An order of reinstatement would nip the further intents of unscrupulous and unjust employers in the bud and encourage fairer treatment of employees in the workplace. The author is referring to the kind of employer whom, regardless of the outcome of the claimant’s claim, will continue to believe they were in the right and fight reinstatement. This could be the case even when the Court has decided that the dismissal was unfair, unlawful and the claimant had no contributory role to play in it. In this irrational termination situation, employers must be taught to put their hands up, admit that they got it wrong, take back the claimant and treat them better.
Most importantly, the possibility of managing the employer-employee relationship towards one that is workable so as restore the sense of mutual trust and confidence between parties must be considered. As authors Shi & Zhong (2018)17 suggest, the Court may take the middle road and reinstate an employee to a lower position with downgraded benefits, where it would not be inappropriate to do so and where it is in the interest of all parties to do so.
Tahirah Manesah Abu Bakar is the Specialist Consultant and partner of Funktional Solutions. She is also a Research Fellow with the National Human Resource Centre (NHRC) of HRD Corp. She has more than 24 years of experience in Industrial Relations and HR Professionals across the spectrum of industries.
The views expressed here are entirely the writer’s own.
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