Overview
In a recent Industrial Court decision delivered in February 2026, the Court examined whether a dismissal premised on redundancy following a corporate restructuring exercise was carried out with just cause or excuse. The case provides important guidance on the evidential burden imposed on employers and the legal framework governing redundancy-based terminations under Malaysian industrial law.
Background Facts
The employee had served the company for several years in a strategic marketing and corporate-related role. Following the COVID-19 pandemic, the employer faced reduced business activities due to cancellations of events and implemented various cost-containment measures, including salary adjustments and organisational restructuring supported by external consultancy review.
Subsequently, the employer issued a termination notice on the basis that the employee’s position had become redundant as part of the restructuring exercise. The employee challenged the dismissal, contending that her role remained necessary and that the termination was not supported by genuine redundancy. The dispute was referred to the Industrial Court under section 20(3) of the Industrial Relations Act 1967.
Issues Before the Industrial Court
The Court identified three key issues for determination:
First, whether there was a genuine need for organisational restructuring;
Second, whether the employee’s role had in fact become redundant; and
Third, whether the employer adopted a fair and objective selection process in identifying the employee for retrenchment.
These elements reflect the established legal test applicable in redundancy dismissal cases.
Applicable Legal Principles
The Court reiterated that the burden of proof rests on the employer to demonstrate that the dismissal was with just cause or excuse. Where redundancy is relied upon, the employer must adduce convincing and concrete evidence to show that the employee’s services had genuinely become surplus to operational requirements.
The Court further affirmed several settled principles:
First, redundancy refers to a genuine surplus of labour arising from reorganisation of the employer’s business.
Second, restructuring alone is insufficient; the employer must show that the employee’s functions have diminished or are no longer required.
Third, the employer must establish that a fair and objective selection process was applied, including proper consideration of recognised principles such as Last-In-First-Out (LIFO) unless justified otherwise.
Evaluation of the Evidence
The Court accepted that the employer had experienced financial impact during the pandemic and was entitled to reorganise its business to enhance economic viability. However, the Court emphasised that the existence of restructuring does not automatically establish redundancy.
In evaluating whether the employee was truly redundant, the Court noted that the employer acknowledged the continued importance of the employee’s marketing function. There was also no documentary or objective evidence demonstrating that her workload or responsibilities had substantially diminished prior to the termination.
Although the employer asserted that the employee’s duties could be absorbed by other entities within the corporate group, the Court found that no cogent evidence was produced to explain how those duties were redistributed or why the retained employees were more suitable. The absence of a proper comparative evaluation undermined the redundancy justification.
The Court further observed that there was no satisfactory evidence that objective criteria, including LIFO or equivalent fair selection measures, had been applied when selecting the employee for retrenchment.
Decision of the Court
Having considered the evidence and applicable legal principles, the Court concluded that while restructuring was permissible, the employer failed to establish genuine redundancy and did not prove that the employee had been fairly selected for termination.
Accordingly, the Court held that the dismissal was effected without just cause or excuse.
Significance of the Decision
This decision reinforces several key propositions in Malaysian employment law. Employers undertaking restructuring exercises must be prepared to demonstrate, with clear and objective evidence, that the employee’s services have genuinely become surplus. The mere presence of financial challenges or organisational restructuring does not automatically justify retrenchment.
The case also underscores the necessity of applying transparent and objective selection criteria when identifying employees for redundancy. Failure to conduct a proper comparative assessment or to justify any departure from recognised principles such as LIFO may render the dismissal procedurally and substantively unfair.
Conclusion
The decision serves as an important reminder that redundancy dismissals are subject to careful scrutiny by the Industrial Court. Employers must ensure that restructuring exercises are supported by credible evidence and fair procedures, while employees retain the right to challenge dismissals where redundancy is asserted without adequate justification.
The award highlights the Court’s continued emphasis on substantive justification, procedural fairness, and the employer’s evidential burden in redundancy-related terminations.
