FMT
AirAsia’s retrenchment
based on high salaries
improper, unfair, rules
court
The Industrial Court awarded two aircraft engineers combined compensation of RM788,670, saying their selection for retrenchment was ‘unjust’ and ‘inequitable’.
PETALING JAYA: AirAsia Bhd’s decision to retrench two aircraft engineers during the Covid-19 pandemic was “improper” and “unfair” as the decision was premised on the high salaries they drew, the Industrial Court has ruled.
Court chairman Andersen Ong said although the airline had experienced “financial adversity” during the Covid-19 pandemic, it had “adopted the wrong principles” when reducing the surplus of licensed aircraft engineers in its employ.
He also said the airline had failed to make out a case for departing from the “last-in, first-out” principle when retrenching claimants Faisal Sulaiman and Izwan Nezar.
“The company’s decision to target (the claimants) for retrenchment based on (their) higher salary compared to (their) colleagues (holding identical licences) lacked good faith,” he said in two separate awards handed down on May 23 and sighted by FMT.
Ong awarded Faisal and Izwan, who had each served the airline for 16 years, an aggregate sum of RM788,670 in back pay and compensation in lieu of reinstatement.
Faisal, whose last-drawn salary was RM15,048.00, was awarded RM403,286.40.
He was given 24 months’ backpay totalling RM361,152, but saw the sum reduced by 55% to RM162,518.40 on account of post-dismissal earnings.
He also received RM240,768.00 as compensation in lieu of reinstatement, calculated at the rate of one month’s salary for each year of service.
Meanwhile, Izwan, who drew RM14,380 per month, was awarded RM385,384.00, comprising back wages of RM155,304.00, after a similar deduction for post-dismissal earnings. He also was awarded RM230,080 as compensation in lieu of reinstatement.
The court, however, reduced the amounts payable to Faisal and Izwan by RM57,444.00 and RM55,440.00, respectively, taking into account compensation payments they received when their services were terminated.
In the awards, Ong acknowledged that the Code of Conduct for Industrial Harmony (CCIH) prescribed by the human resources ministry does not have the force of law and that the “last-in, first-out” principle is not a mandatory requirement in retrenchment exercises.
“Be that as it may, the CCIH and the Industrial Relations Act 1967 (IRA) have a common objective, which is to promote and maintain industrial harmony,” he said.
“It is for this reason that s.30(5A) was subsequently inserted by way of amendment to the IRA, to expressly provide (that) the court may take into consideration any agreement or code approved by the minister.”
Ong said an employer “must provide strong and good reasons” for not applying the procedures for retrenchment set out in the CCIH.
He said the claimants were targeted for retrenchment because their salaries were higher than those of their peers.
“Retrenchment based solely on high salary is unfair and discriminatory or biased against more experienced employees who have worked longer for the employer.
“Such action is grossly unjust and inequitable because the high salary was granted by the company’s own decision.
“It also disproportionately affects employees who have dedicated more time and effort to the company,” said Ong, adding that the claimants, through their long service, would have contributed significantly to the employer’s success.
AirAsia had told the court the Covid-19 pandemic had forced it to halt operations and ground 96% of its fleet.
It said that as a result, its group had suffered a net operating loss of RM457 million for 2019, compared to a net operating profit of RM352.6 million in the preceding year.
Those losses then ballooned to RM953.3 million for the first quarter of 2020 following a worldwide lockdown on travel, the airline said.
As a result, AirAsia said it was forced to implement several cost-containment measures, including the right-sizing of manpower, cutting the salaries of its directors, management and staff, undertaking deferral negotiations with lessors, suppliers and partners, and restructuring of its fuel hedging positions.
It said the claimants were retrenched on June 7, 2020, after all other measures taken to contain costs had failed.
However, Ong ruled that the airline had acted “in contravention of the spirit and intent of the CCIH”.
Noting that the airline’s own witnesses had confirmed the claimants’ selection based on their higher wage packets, Ong said:
“Targeting them based solely on salary overlooks their contributions and may undervalue their loyalty and dedication.
“Furthermore, it could perpetuate age discrimination, as older employees tend to have higher salaries due to their tenure and experience.”
S Selvarani of the Malaysian Trades Union Congress represented the claimants, while Wendy Lam and Wong Jia Ee appeared for AirAsia.
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