Unfair dismissal…compensation, reinstatement, or neither?

The facts
The first respondent, So Lai @ Soo Boon Lai (the employee), had been in the employment of the appellant company, Unilever (M) Holdings Sdn Bhd (the employer), for 17 years. Just 14 months short of his mandatory retirement age of 55, he was dismissed. The employee challenged his dismissal by filing a complaint at the Industrial Court. The Industrial Court decided in his favour, and he was awarded compensation (in lieu of reinstatement), in the form of 24 months’ backwages.

The employer, being dissatisfied with the decision, filed for judicial review of the decision of the Industrial Court, and for the award to be quashed. Although the employer’s application was dismissed, the award for backwages was reduced to 14 months instead, bearing in mind that the employee’s retirement age was 55. On appeal, the Court of Appeal dismissed the appellant’s appeal and reaffirmed the High Court’s decision. The appellant appealed to the Federal Court.

The decision
In allowing the appeal, the Federal Court held that the words ‘compensation in lieu of reinstatement’ in plain English mean that such compensation was meant to be a replacement or a substitute or an alternative to reinstatement. The element of compensation, therefore, will arise only when the employee is in a position or situation to be reinstated.

If an employee could not be reinstated because his age was past mandatory retirement, the issue of compensation does not arise. Furthermore, since reinstatement is a form of specific performance, it could only be ordered in a situation where there was a legal basis for such performance.

Conclusion
This ruling raises various issues on whether such position is deemed fair and just, as there is a great risk of it being misused, considering that the circumstance which the employee found himself in when the case was heard was completely beyond his control. Furthermore, it may provide errant employers with the carte blanche to misuse this precedent to terminate employees close to retirement age, bearing in mind that there is no possibility of compensation in lieu of reinstatement.

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Endnotes
1. [2015] 3 CLJ 900, Federal Court