Return to Status Quo – Arrears on Back Wages

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In 2018, the case of Lee Lily and Leong Chee Kong against Novartis Corporation (Malaysia) Sdn. Bhd. was heard together and reported in Award No. 2195 of 2018 as they had arisen from the same facts.  The claimants were accused of misconduct for the breach of Company rules and policy as well as negligence thereby causing financial loss to the Company. A third party was found to be the root cause of the situation and had admitted doing so via a police report. The Industrial Court found that it was unfair and unreasonable to blame the Claimants for the actions of another and found the dismissals to be without just cause and excuse.

The award given by the court was to order reinstatement for both claimants. The court went on further to order full back wages for the duration of the period that they were out of employment to be paid back, less 50% and all the other benefits and allowances that would have to be paid to the Claimants.

Consequently, the Company and the Claimants were unable to come to a mutual understanding with regards to the payment of back wages. To resolve the issue, both claimants filed an application for interpretation under S.33 (1) Industrial Relations Act 1967 (IRA 1967).

In identical awards based on the application for interpretation, the judgement by Chairman Y.A. Tuan Bernard John Kanny put forward the argument that the limitation of back wages of 24 months did not apply to awards where reinstatement was ordered. Therefore, in accordance with the Award 2195 of 2018, they would both be accorded back wages and benefits and allowances for 28 months in total amounting to almost RM800,000 each.

The award by the Chairman was seen to be contrary to the limitation on back wages set out by Schedule 2 of the Industrial Relations Act 1967. Whereby, the maximum award for back wages allowed is 24 months.

In order to support his argument to depart from the limitation, the Chairman made the distinction that the Schedule 2 limitation in relation to back wages only applies in the granting of compensation in lieu and not to reinstatement. He provided what was a seemingly compelling argument making reference to a previous Practice Direction and the case of Sabah Forest Industries Sdn. Bhd. V Industrial Court Malaysia & Anor [2014] to further substantiate his view.

Unhappy with the interpretation attained, the matter was taken up in judicial review before the High Court. The High Court judge, Mariana Yahya, made the ruling that “Back wages cannot exceed 24 months, irrespective of whether the employee is given back his job,” thereby quashing the interpretation of the Industrial Court.

With this, the status quo with regard to the maximum award of back wages has been restored. Whether its for back wages given in addition to a compensation or as part of reinstatement, the maximum award an Industrial Court can make is for 24 months.

The High Court maintained the findings of the Industrial Court that the dismissal was without cause and the reinstatement order was correct. Only the decision as to the quantum of award varied. In conclusion, the judge made the ruling that Leong was now entitled to 12 months in back wages.