Malaysia – Recognition Of A Fixed Term Contract For High Ranking Employees.

13 August, 2019

 

In the recent decision by the High Court in Sime Darby Auto Selection Sdn Bhd v Lim Boon Leong, we successfully quashed the decision of the Industrial Court which awarded the claimant (“Lim Boon Leong”) RM 1.2 million in his unfair dismissal claim against the company (“Sime Darby Auto Selection”).

 

Lim Boon Leong accepted the promotion to Managing Director of Sime Darby Auto Selection which entailed converting his permanent employment status to that of a fixed term employee. During the fixed term employment period, the financial performance of Sime Darby Auto Selection under Lim Boon Leong’s management was poor. Pursuant to this, Sime Darby Auto Selection had decided not to renew Lim Boon Leong’s fixed term employment contract upon its expiry.

 

The Industrial Court in its award held, amongst others, that Lim Boon Leong’s fixed term contract was not genuine and that Lim Boon Leong’s superior had purportedly given verbal assurances that the fixed term contract was just a formality and would be automatically renewed upon its expiry.

 

Sime Darby Auto Selection challenged the decision of the Industrial Court by way of a judicial review application filed at the High Court. The High Court ruled that the Industrial Court had committed serious errors of law in arriving at its decision. Amongst the findings of the High Court are as follows:

 

1. The Industrial Court should have given effect to the fixed term contract as it was clear and unambiguous;
2. The Industrial Court failed to take into account the fact that Lim Boon Leong signed and agreed to the terms and conditions despite having the choice to accept or decline. Therefore, he must be bound by the terms and conditions therein.
3. The fact that Lim Boon Leong raised “concerns” regarding his employment status does not preclude from the fact that he had accepted the fixed term contract.
4. Oral evidence cannot used to contradict or change the express terms of the fixed term contract.
5. It was in evidence that Sime Darby Auto Selection was experiencing losses and that after Lim Boon Leong’s release it began to achieve profits.

 

The decision of the Industrial Court affirmed the position that a permanent employee can be converted into a fixed term employee in particular for high ranking employees in an organisation.

 

For further information, please contact:

 

Sivabalah Nadarajah, Partner, Shearn Delamore & Co​

sivabalah@shearndelamore.com