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Employment Law
Unfair Dismissal RM893,200 Awarded!

In the landmark Industrial Court case of HHC vs. Heineken Malaysia Berhad, the court’s decision to award RM893,200 to the claimant, Ms. Heng, for unjust dismissal sends a powerful message to employers across Malaysia. This case, centered on the misuse of Performance Improvement Plans (PIPs), highlights the legal and financial implications of handling employee performance management improperly. Here, we analyze the court’s ruling, the significant award amount, and the best practices employers can adopt to ensure fair and effective performance management.

Background of the Case: A Senior Employee’s Claim of Unjust Dismissal

Ms. Heng, a senior management employee at Heineken Malaysia with over 21 years of service, claimed she was dismissed without just cause or excuse. Hired in 2000, Ms. Heng’s career progression had been marked by commendable performance, eventually culminating in her role as Head of IT Operations. However, beginning in 2019, following significant managerial changes, her performance was questioned, and she was placed on a series of PIPs. Ultimately, the company terminated her employment in 2022, citing her alleged inability to meet performance expectations.

The Industrial Court ruled that Heineken failed to substantiate its claims of poor performance, finding procedural flaws and inconsistencies in how Ms. Heng’s performance was managed, monitored, and evaluated under the PIPs. This ultimately led the court to conclude that her dismissal was without just cause or excuse.

The Role of Performance Improvement Plans (PIP) and Their Misapplication in This Case

A PIP is designed to provide struggling employees with structured feedback, measurable goals, and additional support to help them meet the company’s performance standards. However, as this case illustrates, PIPs can be misused or implemented without the necessary procedural safeguards, leading to claims of unfair dismissal.

Key Issues with the PIPs in Heineken Malaysia’s Case

The Industrial Court highlighted several critical issues in how Heineken Malaysia implemented and monitored Ms. Heng’s PIP:

1. Lack of Fair Monitoring and Documentation:

   • The court found several gaps in the monitoring of Ms. Heng’s performance. There were extended periods where no meaningful reviews or feedback were provided. For instance, although PIP1 was supposed to last six months starting in July 2020, it was concluded in just three months, with no clear explanation for the early termination.
   • Furthermore, the court noted that multiple changes in Ms. Heng’s supervisors and departmental restructuring compromised the objectivity and consistency of her performance evaluations.

2. Use of PIP as a Tool for Dismissal Rather than Improvement:

   • The court concluded that Heineken’s decision to place Ms. Heng on PIPs appeared more as a tactic to facilitate her exit rather than an attempt to genuinely improve her performance. The PIP2, implemented in October 2021, lacked sufficient documentation and actionable feedback, leading the court to question its legitimacy.
   • Testimony from Ms. Heng’s former superiors indicated that the PIP may have been influenced by bias, as she had previously received positive appraisals and commendations for her work, even as late as 2020.

3. Impact of Organizational Restructuring:

   • The court also emphasized that the company’s restructuring, which included changes in reporting lines and departmental downsizing, played a significant role in Ms. Heng’s declining performance. Her reduced access to necessary resources and diminished authority undermined her ability to fulfill her job duties effectively.

The Industrial Court’s findings demonstrate that using a PIP as a vehicle for dismissal rather than an instrument of performance improvement can lead to costly legal consequences.

The Award: RM893,200 in Compensation for Wrongful Dismissal

The RM893,200 award granted by the Industrial Court is notable both for its size and for how it was calculated. The court’s decision to provide back wages and compensation in lieu of reinstatement reflects the severity of Heineken Malaysia’s handling of the PIPs and the resulting wrongful dismissal.

Breakdown of the Award Amount

1. Back Wages: The court awarded Ms. Heng 19 months of back wages, amounting to RM424,270 (calculated as RM22,330 per month, her last drawn salary).
2. Compensation in Lieu of Reinstatement: Since reinstatement was deemed unsuitable due to Ms. Heng securing alternative employment with a higher salary, the court awarded compensation based on one month’s salary per year of service, totaling RM468,930 for her 21 years with the company.

Together, these amounts culminated in the substantial award of RM893,200. This figure not only represents compensation for Ms. Heng but also serves as a reminder to employers regarding the potential financial risks associated with mishandling dismissal processes.

Best Practices for Employers: How to Implement a Fair and Transparent PIP Process

This case offers valuable insights into the importance of adhering to fair practices when implementing a PIP. To avoid legal complications and protect employee rights, employers should consider the following best practices:

1. Objective and Consistent Performance Standards:

   • Clearly define performance standards and expectations in writing before initiating a PIP. Ensure that these standards align with the employee’s job description and that they are reasonable given the employee’s resources and responsibilities.

2. Regular Documentation and Feedback:

   • Maintain thorough documentation at every step of the PIP, including specific performance goals, progress updates, and any feedback sessions. Regularly review and discuss the employee’s performance to allow for meaningful improvements.
   • Avoid unexplained gaps in monitoring, as these can weaken the credibility of the PIP process, as seen in this case.

3. Provide Genuine Opportunities for Improvement:

   • The primary goal of a PIP should be to support the employee in reaching expected performance levels. Employers should provide access to necessary resources, coaching, and constructive feedback.
   • Avoid using PIPs as a means to build a case for dismissal without sincere efforts to help the employee improve.

4. Ensure Transparent Communication:

   • Transparent and respectful communication is essential to maintain trust and avoid misunderstandings. Ensure that employees understand the expectations of the PIP and feel that they are treated fairly throughout the process.

5. Consider the Impact of Organizational Changes:

   • If the company undergoes restructuring or major changes that affect an employee’s performance, these factors should be taken into account before implementing or continuing a PIP. The court in this case considered restructuring as a mitigating factor in Ms. Heng’s performance.

Conclusion: A Key Case for Malaysian Employment Law

The Industrial Court’s ruling in favor of Ms. Heng demonstrates the importance of a fair, objective, and transparent approach to performance management. The RM893,200 award reflects not only compensation for wrongful dismissal but also highlights the potential financial and reputational risks companies face when handling PIPs improperly.

By implementing performance improvement plans in good faith, with clear goals, regular feedback, and consistent documentation, employers can support struggling employees and protect their organizations from legal liabilities.