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Court of Appeal: reinstatement an inappropriate remedy for senior employees

Novartis Corporation (Malaysia) Sdn Bhd v. Mahkamah Perusahaan Malaysia & 2 Ors

Court of Appeal Civil Appeal No. W-01(A)-638-11/2019

Earlier today, the Court of Appeal partially allowed an appeal by Novartis 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 (see here).

While maintaining their dismissals to be without just cause or excuse, the Court of Appeal nevertheless concluded that the Industrial Court had erred in ordering the employees to be reinstated in light of, among other things, the damaged trust and confidence between Novartis and the employees, their high-ranking positions, and the length of time that had elapsed from their dismissal (in January 2014) to the resolution of their claims (in September 2018).

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 Phung [2008] 2 MLJ 785, 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 ie 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."

In the instant case, the employees held senior positions as the Chief Finance Officer and the Head of Marketing and Sales Operations, and more than four years had elapsed from the date of their dismissal till the resolution of their claims at the Industrial Court. Moreover, while Novartis had not established the charges of negligence against the employees, 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 accordingly quashed the Industrial Court Award to that extent. The matter has been remitted back to the Industrial Court to determine the appropriate compensation to be paid to the employees in lieu of reinstatement.

In two related appeals brought by the employees, the Court of Appeal had maintained that the Industrial Court had erred in concluding it was empowered to award more than 24 months as backwages, but had partially allowed the employees' appeal against the imposition of a 50% deduction (see here and here).

The takeaway from this appeal and its outcome is that, although reinstatement is the primary remedy under section 20 of the Industrial Relations Act 1967, it is often inappropriate in the circumstances of the case, and the Industrial Court must always consider whether industrial harmony, equity and good conscience are being served in making its final orders.

The Industrial Court Awards and the High Court Grounds of Judgment can be viewed below.

Novartis Corporation (Malaysia) Sdn Bhd was represented by our Managing Partner, Dato' Thavalingam C. Thavarajah, Partner, David Tan Seng Keat and Associate Rebecca Sonali Alfred.

2018.9.14 Industrial Court Award No. 2195 of 2019 - Lee Lily & Anor v
. Novartis Corporatio
2019.3.1 Industrial Court Award No. 832 of 2019 - Lee Lily v
. Novartis Corporation (Malays
2019.3.1 Industrial Court Award No. 834 of 2019 - Lee Lily v
. Novartis Corporation (Malays
2020.2.1 High Court Grounds of Judgment - Novartis Corporation (Malaysia) Sdn Bhd v
. Mahka
Download MAHKA • 855KB


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