28 October, 2017
Backwages is awarded to an unjustly dismissed workman, irrespective of whether he is awarded reinstatement or compensation in lieu of reinstatement. It is awarded primarily to compensate the workman for the period that he had been unemployed because of his dismissal. Prior to theIndustrial Relations (Amendment) Act 2007, which came into force on 28 February 2008 and introduced the Second Schedule to the Industrial Relations Act 1967 (“IRA 1967”), the awards of backwages made by the Industrial Court varied from the granting of full backwages to limiting backwages to 24 months.
The doctrine of mitigation[1] has been held to have no place in industrial adjudication. In Great Eastern Mills Bhd v Ng Yuen Ching[2], the High Court expressed the view that scaling down backwages or limiting it to two years because the workman was in gainful employment is not an application of the mitigation principle. The income earned by the workman elsewhere during the period of his enforced unemployment would be a relevant factor to be taken into consideration in denying or scaling down the quantum of backwages due to an employee who had been unfairly dismissed.
The above principle has been endorsed by the Federal Court in Dr James Alfred, Sabah v Koperasi Serbaguna Sanya Bhd, Sabah & Anor[3]. The Court held:
“…In our view, it is in line with equity and good conscience that the Industrial Court, in assessing quantum of backwages, should take into account the fact, if established by evidence or admitted, that the workman has been gainfully employed elsewhere after his dismissal…”
Pursuant to the Dr James Alfred decision, the Industrial Court had, in a plethora of cases, ruled that no deductions be made from the backwages to be awarded where there was no evidence of post-dismissal earnings[4].
The Federal Court’s view in Dr James Alfred is reflected in the Second Schedule to the IRA 1967 which provides that “where there is post-dismissal earnings, a percentage of such earnings, to be decided by the Court, shall be deducted from the backwages given”. It is noted that by virtue of paragraph 3 of the Second Schedule, the Industrial Court is now obliged by statute to make the necessary deductions by percentage basis from the backwages where there is evidence of post-dismissal income.
In the case of Yong Peng Kean v TT Electrical Electronics Corporation (M) Sdn Bhd & Anor[5], the Court found that there was no evidence of post-dismissal earnings adduced by any party and that the company failed to cross-examine the claimants in that case on their post-dismissal earnings. Although the Court stated “[b]oth the Claimants are still able-bodied and employable and the court has no doubt that they have been gainfully employed since their dismissal by the Company” the Court in Yong Peng Kean did not make any deductions on the backwages.
Recent decisions appear to have departed from the established practice of taking into account post-dismissal income only where there is evidence of the same. In the case of Lee Seong Fatt v Joint Management Body of Pearl Point Condominium[6], the Industrial Court found that there was no evidence that the claimant had obtained employment elsewhere or whether he remained unemployed from the date of dismissal until the date of the hearing. Nonetheless, the Court made a deduction of 30% on the backwages for post-dismissal earnings. In making its decision, the Industrial Court relied on an earlier decision in DTS Trading Sdn Bhd v Wong Weng Kit[7] which held:
“In a society such as ours where a person would invariably have to work in order to sustain day to day living, the court is of the view that even if no evidence is adduced as regards post dismissal earnings, the court is entitled nevertheless to make a deduction for post dismissal earnings. As such, a claimant who has not been gainfully employed since his dismissal, or who has been gainfully employed but on a woefully small salary, should clearly say so to the court. To remain silent is to risk the court making a deduction deemed reasonable by the court.”
Similarly, in the case of Mohd Irwan Bin Arifin v Aluminium Company of Malaysia Berhad[8], although the Industrial Court found that there was “no or very little evidence being adduced on post dismissal earning by the Claimant” (the claimant merely stated in his witness statement that he was not working at the time of the hearing), the Court was prepared to infer that the claimant was gainfully employed or earning some form of income during the post-dismissal period.
In arriving at their conclusions, the Industrial Court in Lee Seong Fatt and Mohd Irwan Bin Arifinappeared to have relied on the mitigation principle. These decisions mark the willingness of some divisions of the Industrial Court to depart from the established practice of taking into account post-dismissal income only where there is evidence of the same. It remains to be seen whether these decisions will pave the way for a more flexible approach on the requirement of evidence in scaling down the quantum of damages.
[1] The doctrine of mitigation in damages requires the claimant who has been dismissed without just cause to mitigate his loss by seeking alternative employment and in the event he gets any income after his dismissal it ought to be deducted from the compensation awarded by the Court.
[2] [1998] 6 MLJ 214
[3] [2001] 3 CLJ 541
[4] Galift (M) Sdn Bhd v Foo Ah Men @ Foo Chee Choon, [2010] 2 LNS 1356 Ottoh Bin Poting v IOI Edible Oils Sdn Bhd[2014] 4 ILR 173 and Hazlinda Sanusi v HSBC Electronic Data Processing (Malaysia) Sdn Bhd [2016] 3 ILR 88
[5] [2012] 2 LNS 0974
[6] [2016] 2 LNS 0704
[7] [2008] 1 ILR 548
[8] Award No 168 of 2017
For further information, please contact:
Sivabalah Nadarajah, Partner, Shearn Delamore & Co
sivabalah@shearndelamore.com
