Case summary of Muhammad Fawaid Daud v Airod Sdn Bhd [2024] MELRU 836
The dispute between the parties here is on whether Muhamad Fawaid Bin Daud (“Claimant”)’s contracts of employment were genuine fixed term contracts or otherwise.
The Claimant was awarded RM1.1 million for unfair dismissal. The Industrial Court ruled that the Claimant, who had been issued annual fixed-term contracts for 20 years, was a permanent employee of Airod Sdn Bhd (“Company”) and was unfairly dismissed. This decision highlighted the company’s practice of issuing fixed-term contracts and the associated legal implications.
.
INTRODUCTION
By an employment contract dated 1.8.1988, the Claimant was employed by the Company as an engineer with a starting salary of RM1,300.00 per month. The Claimant continued in his employment with the Company as a permanent employee and on 1.1.2000, the Company converted the Claimant’s permanent employment to a fixed term contract of employment for 1 year as the Company’s general manager. Thereafter the Company continued placing the Claimant under fixed term contracts for 20 years without any break in the Claimant’s employment with the Company. The Claimant enjoyed automatic renewal of his employment contracts without the Claimant making any application for such renewals.
The Claimant’s last held position in the Company was a Senior General Manager and his last drawn salary was RM20,307.00 per month. After 32 years of service with the Company, on 21.12.2020, the Company issued a letter to the Claimant informing him that his last fixed term contract of employment that commenced on the 20.1.2020 will come to an end on the 31.12.2020, and that it will be the last date of the Claimant’s service with the Company.
The Claimant states that the expiry of the Claimant’s last fixed term contract leading to his loss of employment in the Company amounted to a dismissal from his employment in the Company. The Claimant asserts that all the fixed term contracts of employment offered to the Claimant since 1.1.2000 were not genuine fixed term contracts but was a permanent contract of employment disguised as fixed term contracts. The Claimant states that he was at all material times a permanent employee of the Company. The Claimant now states that he was dismissed from his employment without just cause or excuse and prays that he be reinstated to his former position in the Company without any loss of wages and other benefits.
The Company however maintains that the Claimant’s continuous contracts of employment which commenced from the period 1.1.2000 were genuine fixed term contracts of employment and the last genuine fixed term contract of employment had come to an end through an effluxion of time on 31.12.2020. The Company states that the Claimant’s employment with the Company effective 1.1.2000 was categorised as managerial level which comes with lucrative salary scheme with additional perks which were not enjoyed by permanent employees of the Company. It is the Company’s policy that all employees of the Company under managerial level will be offered fixed term contracts of employment only. The Company states that when the Claimant’s permanent contract of employment was converted to fixed term contracts on 1.1.2000 with a senior position in the Company, the Claimant knew that he was voluntarily accepting that genuine fixed term contract and since 1.1.2000, all his fixed term contracts of employment were genuine fixed term contracts which the Claimant signified acceptance without any protest. The Company denies dismissing the Claimant from his employment with the Company.
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INDUSTRIAL COURT’S FINDINGS
The Court held that the Claimant was a permanent employee of the Company and all the fixed term contracts of employment given to the Claimant by the Company for a period of 20 years consecutively without any break and by way of an automatic renewal were not genuine fixed term contracts of employment but was in fact a permanent contract of employment disguised as fixed term contracts. It can create a legitimate expectation of permanent employment to the Claimant. The Company’s attempts to use fixed term contracts to circumvent such legitimate expectation, commits unfair labour practice.
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CONCLUSION
This does not mean that a company cannot have fixed term contract employees. There are many genuine reasons to do so (i.e.: post-retirement roles, for seasonal jobs to complete a specific project, for maternity cover). However, a company cannot use a fixed term contract, no matter how cleverly it is drafted to disguise what is essentially a permanent employment.
While fixed term contracts may seem like a “safe bet,” acting inconsistently with a fixed term contract has repercussions. The company’s conduct throughout the employee’s employment is as important as the contract terms, when it comes to unfair dismissal complaints.
About the author
Tey Siaw Ling Senior Associate Employment and Industrial Relations, Alternative Dispute Resolution Harold & Lam Partnership [email protected]
Can a Fixed Term Contract Employee Be Deemed as a Permanent Employee?
Case summary of Muhammad Fawaid Daud v Airod Sdn Bhd [2024] MELRU 836
The dispute between the parties here is on whether Muhamad Fawaid Bin Daud (“Claimant”)’s contracts of employment were genuine fixed term contracts or otherwise.
The Claimant was awarded RM1.1 million for unfair dismissal. The Industrial Court ruled that the Claimant, who had been issued annual fixed-term contracts for 20 years, was a permanent employee of Airod Sdn Bhd (“Company”) and was unfairly dismissed. This decision highlighted the company’s practice of issuing fixed-term contracts and the associated legal implications.
.
INTRODUCTION
By an employment contract dated 1.8.1988, the Claimant was employed by the Company as an engineer with a starting salary of RM1,300.00 per month. The Claimant continued in his employment with the Company as a permanent employee and on 1.1.2000, the Company converted the Claimant’s permanent employment to a fixed term contract of employment for 1 year as the Company’s general manager. Thereafter the Company continued placing the Claimant under fixed term contracts for 20 years without any break in the Claimant’s employment with the Company. The Claimant enjoyed automatic renewal of his employment contracts without the Claimant making any application for such renewals.
The Claimant’s last held position in the Company was a Senior General Manager and his last drawn salary was RM20,307.00 per month. After 32 years of service with the Company, on 21.12.2020, the Company issued a letter to the Claimant informing him that his last fixed term contract of employment that commenced on the 20.1.2020 will come to an end on the 31.12.2020, and that it will be the last date of the Claimant’s service with the Company.
The Claimant states that the expiry of the Claimant’s last fixed term contract leading to his loss of employment in the Company amounted to a dismissal from his employment in the Company. The Claimant asserts that all the fixed term contracts of employment offered to the Claimant since 1.1.2000 were not genuine fixed term contracts but was a permanent contract of employment disguised as fixed term contracts. The Claimant states that he was at all material times a permanent employee of the Company. The Claimant now states that he was dismissed from his employment without just cause or excuse and prays that he be reinstated to his former position in the Company without any loss of wages and other benefits.
The Company however maintains that the Claimant’s continuous contracts of employment which commenced from the period 1.1.2000 were genuine fixed term contracts of employment and the last genuine fixed term contract of employment had come to an end through an effluxion of time on 31.12.2020. The Company states that the Claimant’s employment with the Company effective 1.1.2000 was categorised as managerial level which comes with lucrative salary scheme with additional perks which were not enjoyed by permanent employees of the Company. It is the Company’s policy that all employees of the Company under managerial level will be offered fixed term contracts of employment only. The Company states that when the Claimant’s permanent contract of employment was converted to fixed term contracts on 1.1.2000 with a senior position in the Company, the Claimant knew that he was voluntarily accepting that genuine fixed term contract and since 1.1.2000, all his fixed term contracts of employment were genuine fixed term contracts which the Claimant signified acceptance without any protest. The Company denies dismissing the Claimant from his employment with the Company.
.
INDUSTRIAL COURT’S FINDINGS
The Court held that the Claimant was a permanent employee of the Company and all the fixed term contracts of employment given to the Claimant by the Company for a period of 20 years consecutively without any break and by way of an automatic renewal were not genuine fixed term contracts of employment but was in fact a permanent contract of employment disguised as fixed term contracts. It can create a legitimate expectation of permanent employment to the Claimant. The Company’s attempts to use fixed term contracts to circumvent such legitimate expectation, commits unfair labour practice.
.
CONCLUSION
This does not mean that a company cannot have fixed term contract employees. There are many genuine reasons to do so (i.e.: post-retirement roles, for seasonal jobs to complete a specific project, for maternity cover). However, a company cannot use a fixed term contract, no matter how cleverly it is drafted to disguise what is essentially a permanent employment.
While fixed term contracts may seem like a “safe bet,” acting inconsistently with a fixed term contract has repercussions. The company’s conduct throughout the employee’s employment is as important as the contract terms, when it comes to unfair dismissal complaints.
About the author
Tey Siaw Ling
Senior Associate
Employment and Industrial Relations, Alternative Dispute Resolution
Harold & Lam Partnership
[email protected]
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