LETTER | Status of workers in change of business ownership

LETTER | Retrenching workers is an employer’s prerogative which could be justified when carried out for profitability or convenience of the employer’s business.

However, it should not be carried out for ulterior motives such as to get rid of employees who have offended the employer in some way or to promote the interests of some favoured employees to the detriment of others.

With the current harsh economic conditions, to save business costs and as a measure to avert retrenchment, the employer is empowered to restructure the business and this may involve transferring workers not only within the company but even from one company to another within the organisation or within the group, or to an associate company.

This implies that the right of the employer should not be refused by the workers unless there is a clear and unambiguous express mobility clause to the contrary in their employment contract.

Again, the right to transfer workers must be exercised for legitimate business reasons and not for a collateral purpose such as to victimise workers, as any misuse or abuse of the implied managerial prerogative may attract the intervention of the Industrial Court.

But when there is a change of business ownership, the law is settled in that a contract of service cannot be transferred from one employer to another without the employee’s prior consent.

Compelling an employee to work for a particular employer, without affording him a choice in the matter is a form of forced labour and this is prohibited by article 6(2) of the Federal Constitution.

In the last mentioned circumstances, section 12 of the Employment Act 1955 requires the previous employer to issue a notice of termination of the contracts of service to each worker.

Any attempt to evade the law by compelling the workers to continue their employment with another employer is unconstitutional.

It constitutes forced labour because it deprives the worker the right to free choice as to the course he or she wishes to adopt and the parties are prohibited from ousting the above constitutional provision in their private arrangement.

In relation to termination benefits eligibility, regulation 8 of Employment (Termination and Lay-Off Benefits) Regulations 1980 provides that the employees of the previous owner shall not be entitled to any termination benefits if they unreasonably refused the offer of continuous employment by the new owner under the terms and conditions of employment not less favourable than those under the previous employer.

If they accept the offer, their period of employment with the previous employer shall be deemed to be a period of employment under the new owner, and the change of employment shall not constitute a break in the continuity of the period of his employment.

However, if the new owner does not offer the continuity of employment, their contract of service shall be deemed to have been terminated.

Consequently, the person by whom the employee was employed immediately before the change of ownership shall be liable to pay the termination benefits at the rate specified in the 1980 Regulations.

ASHGAR ALI ALI MOHAMED is a law professor at the International Islamic University Malaysia (IIUM).

The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.