In Tan Chin Lin v. Seagate Global Business Services (Malaysia) Sdn Bhd [2023] MELRU 2260, the Industrial Court of Malaysia was tasked with determining whether the Claimant had been unfairly dismissed or had voluntarily ended his employment through the company’s Voluntary Separation Scheme (VSS).
Brief Facts
- In July 2019, the Company invited employees (including the Claimant) to apply for the Company’s VSS, due to a global restructuring. Under the VSS, employees would receive severance payments in exchange for their voluntary separation from the Company.
- The Claimant applied for the VSS, and his application for approved by the Company.
- The Claimant received RM423,697.35 as part of the VSS payout, and served out his notice period of 6 months before leaving the Company.
- After the Claimant’s final date of employment, he alleged that he was coerced into applying for the VSS, under the belief that his job would be eliminated. He claimed that the Company misled him into thinking he would be retrenched if he did not apply for the VSS.
- Among the Claimant’s grievances was that his functions were taken over by another employee (based in India).
- The Claimant filed a representation for reinstatement under section 20(3) of the Industrial Relations Act 1967, claiming unfair dismissal.
Court’s Findings
In a VSS situation, the Claimant bears the burden of proving that the VSS was not voluntarily entered into.
The Claimant argued that he had been misled and coerced into applying for the VSS. However, during cross-examination, the Claimant admitted no one forced him to apply for the VSS or sign the agreement. He also confirmed during cross-examination he did not protest the VSS at any time, and no one had dictated what words to write when he wrote the VSS application.
The Claimant argued that there was a threat of retrenchment because the Company’s VSS timeline document indicated that there would be a retrenchment after the VSS applications However, the Industrial Court considered all the evidence and concluded this does not equal a threat of retrenchment. The Company’s witnesses testified that after the VSS applications are in, the Company would re-examine whether the financial targets and business objectives are met – it did not necessarily mean that the Company would automatically go into a retrenchment. Therefore, the Claimant’s assertions that he would be forcibly retrenched if he did not apply for a VSS, were unsubstantiated.
The Industrial Court also highlighted the Federal Court’s decision in Zainon Ahmad & Ors. v. Padiberas Nasional Bhd., which affirmed that a VSS is a voluntary agreement. The Federal Court observed that, under the VSS, the employee had the option to accept the scheme or continue to work as before and once the option had been exercised by the employees, the question of it being unfair did not arise.
The Court found that the Claimant had not proven that he was dismissed by the Company. Instead, the evidence showed that the Claimant voluntarily ended his employment through the VSS. The Court dismissed the Claimant’s case, concluding that there was no unfair dismissal:
“…the Claimant, who had on his own free will accepted the benefits of the VSS Agreement, resigned, signed a full and final settlement and walked away cannot then turn around and ask for other benefits.”
Key Takeaways
The decision emphasizes the sanctity of voluntary agreements like a VSS. If an employee voluntarily enters such arrangements and enjoys the benefits/payments from the same, it is inequitable for them to later claim unfair dismissal.
Naturally, sometimes, a VSS is not truly voluntary – for example, an employee could have been threatened to apply for a VSS, or forced to sign documents. In such cases, the threat (if proven) could vitiate the voluntariness of the VSS and render it an unfair dismissal. However, the burden of proving that vitiating factor lies on the employee, as the person making the allegation. There must be evidence to support such allegations.
[Note: The Claimant’s application to quash the Industrial Court award was dismissed by the High Court in June 2024]
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This article was written by Donovan Cheah (Partner). Donovan has been named as a recommended lawyer for labour and employment by the Legal 500 Asia Pacific for 2017-2022, and he has also been recognised by Chambers Asia Pacific and Asialaw Profiles for his employment law and industrial relations work.
Donovan & Ho is a law firm in Malaysia, and our employment practice group has built a reputation for providing strategic employment advice to local and global organisations. Our team of employment lawyers provide advice on employment law and industrial relations including review of employment contracts, policies and handbooks, advising on workforce reductions, and managing dismissals of employees for poor performance or misconduct. We also represent clients in unfair dismissal claims and employment-related litigation. Have a question? Please contact us.
