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INDUSTRIAL COURT OF MALAYSIA CASE NO.

19/4-1173/10 BETWEEN ENCIK ZULKARNAIN BIN MOHAMED JUAH AND NXP SEMICONDUCTORS (M) SDN. BHD AWARD NO. 1709 OF 2012 Before Venue Date Of Reference Dates of Mention Dates of Hearing Representation : : : : : : Y.A. PUAN HAPIPAH BINTI MONEL CHAIRMAN (Sitting Alone) Industrial Court Malaysia, Kuala Lumpur. 20.10.2010 16.12.2010. 29.09.2011, 05.03.2012. 23.02.2011, 30.09.2011, 30.03.2011, 19.10.2011, 12.04.2011. 01.12.2011, .. THE COMPANY .. THE CLAIMANT

Mr. Gomez of Messrs. Gomez & Associates Counsel for the Claimant. Mr. Louis Ambrose and Ms. Janet Chai of Messrs. Chooi & Company, Counsel for the Company.

REFERENCE This is a reference under section 20(3) of the Industrial Relations Act 1967 arising out of the dismissal of ENCIK ZULKARNAIN BIN MOHAMED JUAH (hereinafter referred to as the Claimant) by NXP SEMICONDUCTORS (M) SDN. BHD (hereinafter referred to as the Company) on the 22 December 2008.

AWARD The Facts The Claimant commenced employment with the Company on 2nd August 1994 and held the following positions and job grades during his course of employment with the Company: a) Section Head Equipment Engineering with a Job Grade JV15 on 2 nd August 1994; b) Upgraded to Equipment Engineering Manager with a Job Grade JV16 on 1st September 1997; c)
d)

Project Management on 20th February 2003; Purchasing and Logistics Manager on 1st December 2003.

The Company was at all material times and still is in the business of making semiconductor and high tech chips which one can put in all kinds of products. Due to the nature of the business, the Company has a huge support function such as research and development which is the highly important for, or the key to, this high tech industry.

In 2008, due to the worldwide economic downturn that started in early 2008 which had caused a lot of electronic plants and factories in Malaysia to downsize their operations or even in some cases to be shut down, the Claimant's parent company in the Netherlands formulated a restructuring exercise of the NXP group which would affect the NXP group globally including the Company.

In line with the aim to remain competitive, the business and working processes had to be reorganised and trimmed with the ultimate goal to have lower costs and increased efficiency within the NXP group including the Company.

The net result of the Global Restructuring is that there would be employees with redundant job functions, who would have to be retrenched.

The Claimant was terminated by way of a notice dated 22 nd December 2008 (Tab 9 of COB1).
PRIVATE & CONFIDENTIAL Date To : : 22nd December 2008 Zulkarnain Bin Mohd. Juah BY HAND

Retrenchment Further to the announcement made on the 12 th and 16th September 2008, and as you may be aware, the Company has been significantly affected by the challenging economic environment. Due to the difficult business conditions created by the state of the challenging economic environment, the Company has undergone a restructuring and reorganisation exercise premised on a redesign of the company's manufacturing base, its central Research & Development and support functions. However, despite the Company's efforts and as a result of the restructuring and reorganisation of the Company's overall operations, your position as Senior Department Manager Logistics & Purchasing is found to be in excess of requirements of the Company and accordingly your position is surplus and redundant. In this regard, we regret to inform you that the Company has to terminate your services. We do no require you to serve out your notice period and you shall be immediately terminate with effect from 22nd December 2008 and your last working day shall be on 22nd December 2008. All relevant benefits will be paid to you as a result of the termination of your employment according to the Employment (Termination and Lay-Off Benefits) Regulation 1980. In addition, you will also be paid in lieu of annual leave not taken as at the date of termination. All monies due will be paid to you not later than seven (7) days from the termination of you employment in the usual manner that your salary is paid.

According to the Employment (Termination and Lay-Off Benefits) Regulation 1980, your entitlement is 20 days wages for each year of continuous service with the Company. The detailed calculations are attached in Annexe 1. The Company takes this opportunity to express their sincere thanks for the valuable services that you have rendered and to wish you every success in you future endeavours. The company shall be pleased to give you a letter or recommendation for your future employers reference, if requested. Please acknowledge receipt of this letter by signing the duplicate enclosed herewith and returning the same to us. Thank you. Your sincerely NXP SEMICONDUCTS MALAYSIA SDN. BHD Donna Chen Country Managerial Human Resources Management.

The Issue Was the Claimant's function and duties as the Purchasing & Logistics Manager redundant as a result of the Global Restructuring and thereby constituted a surplus to the Company's requirements entitling the Company to terminate him on ground of redundancy?

The Law Retrenchment is a legal expression used to describe an exercise where a business entity terminates the services of employees that it considers as a surplus to its business requirements.

It is recognised that the Company has a prerogative to manage its business and carry out any from of reorganization or restructuring in a bona fide manner.

The burden is on the appellant to prove the actual redundancy on which the dismissal was grounded. The Company must establish that the Claimant's duties and responsibilities (functions) had ceased to exist or substantially diminished at the material time.
Villa, Juan Ir Celino (Jonji Villa) v. Unisys (Malaysia) Sdn. Bhd (2012) 2 LNS 0292 Radzi bin Abu Bakar v. Road Builder (M) Sdn. Bhd (2010) 2 LNS 0256 Bayer (M) Sdn Bhd v. Ng Hong Pau (1999) 4 MLJ 361.

It is not the law that redundancy means that the job or work no longer exists. Redundancy situation arise when the business required fewer employees of whatever kind. In Jeyaraj Kanapathipilla v. Ranhill Bersekutu Sdn. Bhd (2012) 2 ILJ 213 at p. 217A-218D, the Court held that retrenchement was bona fide when the employees job function was taken off and rescheduled to be performed by others it being in line with the aim of the company to stay and viable.

The fact that an employees job or function is still in existence does not necessarily mean that there is no redundancy. If the retrenched worker's job can be performed by those who were not retrenched it means that the retrenched worker is surplus to the needs of the employer. Lim Yu Chee v. Staedtler Marketing Sdn. Bhd (2012) 1 ILJ 296 at p 301A-D, 306C-D.

The burden of proof is vested on the employer to justify that the retrenchment of the Claimant was a bona fide exercise of its re-organisation which resulted in redundancy and hence was with just cause or excuse.

The re-organisation of the Company's business was such that its requirements for a separate and additional employee to carry out the work or the duties previously performed by the employee were absorbed by the remaining staff and not taken over by some one from outside, the Tribunal had rightly held that the employee's dismissal fell within the definition of redundancy.
WRP Asia Pacific Sdn. Bhd v. Siow Kim Kee & 7 ors (2012) 2 ILJ 229 at p2351-236. Jeyaraj Kanapathipilla v. Ranhill Bersekutu Sdn. Bhd (2012) 2 ILJ 213.

The order of retrenchment, therefore, should be left to the management, and the decision of management that some are better qualified cannot be questioned by the Tribunal unless it comes to the conclusion that the preferential treatment was mala fied. If the

preferential treatment given to juniors ignores the well recognized principles of industrial law that 'last in, first out', without any acceptable or sound reasoning the Tribunal will be justified to hold that the action of the management was not bona fide.

But the rule of 'last in, first out' could have obviously no application to the case of retrenchment of the only employee in a particular category of workmen because in such a case it is retrenchment of the post itself, and therefore, if for reasons of economy and any genuine

interest if reorganization, the services of a single employee of a category have to be dispensed with, there is no scope for the application of this principle.
Kumpulan Perangsang Selangor Bhd v. Zaid bin Hj. Mohd Noh (197) 2 CLJ 11 at p 28. Alam Arena Management Sdn. Bhd v. Norfadzilah bt Surip & Anor (2011) 2 ILJ 440 at p452B-G.

The Evidence COW1 was the one who informed the Company's employees, specifically the Management Team and the senior level category of employees of the Company, of the Global Restructuring in September 2008 at a town hall meeting how it came about, the need for it, and the effects of the Global Restructuring, including its effects on the Purchasing and Logistics Department of which the Claimant headed before his termination. Suffice to say at this juncture that the Claimant was part of the Management Team and was present at the town hall meeting held by the Company in September 2008.

COW2 as the Human Resources Country Manager was the one who had to desploy the retrenchment process of the employees identified with redundant job functions under the Global Restructuring.

COW3 had been the General manager of the Company since 1 st January 2009, and has come to this Court to give evidence based on the documents and records in his possession or which he as the General Manager has access to.

Further, COW3's evidence on the Company's need for the Global Restructuring is corroborated by the evidence of COW1 who was at the material time part of the NXP group and the Country Manager of the Company, and who therefore have personal and direct knowledge on the matter.

As for the Claimant's contention that the evidence of COW3 should be expunged from the Court's records, there is no such legal principle in support of the Claimant's proposition that the evidence be expunged from the Court's records on the basis as the Claimant has suggested in his submission, and in any event, the Claimant has not produced any legal authority to support such a proposition. The case of Tempil Perkakas Sdn Bhd v. Foo Sex Hong (1996) 5 MLJ 104 at page 104 is a case on hearsay evidence and admissibility and not expunging of testimony.

In so far as admissibility or the law of evidence is concerned, it is trite that section 30(5) of the Industrial Relations Act imposes a duty upon the Industrial Court to have regard to the substantial merits of a case rather than to technicalities.

In the case of Peter Albert Cornelius v. Fairchild Semiconductor (Malaysia) Sdn Bhd (2009) 2 LNS 0371, it was held that questions of section 32 of the Evidence Act 1950 or hearsay do not arise in industrial court cases in view of section 30(5) of the Industrial Relations Act.

It is to be noted that the case of Tempil Perkakas relied on by the Claimant is not an industrial court's case but rather civil case of goods sold and delivered.

As regards the Claimant's suggestion on the drawing of adverse inference under section 114(g) of the Evidence Act 1950, the following is to be noted:
a) The Company had produced the relevant witnesses to explain the issues in the case to the best of their ability and knowledge, as explained above. b) The Company had during the trial given evidence that the Company did request for the General Manager at the material time, Mr. SK Tan, to come forth but it did not happen as he was no longer with the Company and also no longer in the country.

In the case of Gursharan Kaur Gurcharan Singh v. Logica (Malaysia) Sdn. Bhd (2012) 2 LNS 1394, the Industrial Court noted at pages 12-15 that it is not bound by the technical rules of the Evidence Act and the Court should act with regards to to equity, good conscience and substantial merits of the case. Accordingly, on a similar issue of non-production of the key person who had identified the Claimant's redundancy in the case, the Court noted that the Company had produced the witnesses relevant to the hearing and given evidence to the best of their ability and knowledge and therefore did not draw adverse inference against the Company.

COW3 tendered in evidence the Company's Audited Accounts for the years ended 31 st December 2007 and 31st December 2008 (COB2 Tab 14 & 15). The accounts revealed that for the year ended 31st December 2007, the Company was already making a net loss of RM11,256.000.00 (COB2 page 63). As at 31st December 2008, the Company's financial
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situation became much more worse with a net loss standing at RM159,916,000.00. This facts were not challenged by the Claimant.

Further, it is to be noted that it is established law that by tendering in court its audited accounts, the Company would have sufficiently tendered in court its true financial affairs at that material time.
Alam Arena Management Sdn. Bhd v. Norfadzilah bt Surip & Anor (2011) 2 ILJ 440 at p 4501-451B.

In light of the above, it is clear that the Global Restructuring was a necessity and an unavoidable solution for the Company. As was put by the Company's witnesses, COW1 and COW3, the Global Restructuring was undertaken in response to the financial healt of the NXP group including the Company and the need to improve the financial health of the NXP group including increasing the Company's cash flow to a positive figure.

Prior to the Global Restructuring, the job functions carried out by the Claimant's managerial position of the Purchasing and Logistics Department was primarily to oversee and monitor the performance of the employees in that department. Tab 6 of COB1 for the job description of the Claimant's managerial position of the Purchasing and Logistics Department.

As a result of the streamlining and outsourcing of the Purchasing and Logistics Department respectively, there was no longer any need for the Claimant's managerial or supervisory role which thereby became surplus to the needs of the Company rendering the
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Claimant's managerial post/function redundant. On this note, it should be noted that COW2 gave evidence that the Claimant's job function had ceased to exist in the Company after the Global Restructuring.

Notwithstanding that the Claimant's managerial or supervisory function had ceased to exist pursuant to the Global Restructuring, the Purchasing and Logistics Department, which became more streamlined and downsized, would still have a report to the Company. It is to be noted that pursuant to and after the Global Restructuring, the Purchasing and Logistics Department reported directly to the General Manager of the Company, rather than to the Claimant's managerial position, which had become redundant, by a selected 2 of the 4 section heads/managers in the Purchasing and Logistics Department.

The Claimant sought to raise issues on this change of the reporting being made directly from the selected 2 of the 4 section heads/managers in the Purchasing and Logistics Department, as follows:
a) That the 4 section head/managers who used to report to the Claimant's were retained while the Claimant's was dismissed; b) That the selected 2 of the 4 section head/managers i.e Mohd. Saaid Abdul Latif (of the Purchasing Department) and Mervyn Fernandez (of the Logistics Department), had in fact taken over the previous managerial/supervisory job functions of the Claimant's in the Company, and as such they were given special monthly allowance of RM2,500.00.

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As explained by COW2, the 4 section head/managers were retained as the job functions performed by their rank/position continue to exist unlike the Claimant's managerial/supervisory role which had caused to exist as there was no necessity for a full time managerial post the Claimant's used to hold to oversee a department which has shrunk so drastically in size and in terms of job functions, as explained above, pursuant to the Global Restructuring.

COW2 when questioned by the Claimant's counsel has stated that the special monthly allowance of RM2,500.00 were given to the selected 2 of the 4 section heads/managers due to the reporting function they had to carry out pursuant to the Global Restructuring in addition to their existing or current responsibilities. In fact, the announcement by the General Manager to the Company (CLB1 page 21) states clearly that the selected 2 of the 4 section heads/managers would be responsible for the respective purchasing and logistics functions' reporting to the General Manager, in addition to their existing or current responsibilities.

COW2 in cross-examination has stated that some of the functions that used to be carried out by the Claimant's managerial job function were absorbed into other job roles and performed by others. It is to be noted that as set out above, the law is not such that the job functions had to become completely redundant, so long as the job function had substantially diminished to the extent that the business required fewer employees to perform the function.

The Claimant was not the only one affected by the Global Restructuring. Prior to the outsourcing of the Company's logistics function to DHL, the logistics function consisted of 34 employees as at November 2008. Post the Company's streamlining and simplifying process, 26
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employees were retrenched from the logistics department and their services were terminated from the services of the Company.

At the time of the Claimant's termination, the Claimant held the position of Head of the Logistics and Purchasing Department with a job grade of G70. As a result of the Global Restructuring exercise undertaken by the Company, the Company had also retrenched John Lim, who had initially joined the Company in April 1994 and as at December 2009 was the Head of Quality & Facilities (being 1 of the 6 departments of the Company) with the corresponding job grade of G70 (similar to the Claimant), as his functional layer was redundant and surplus to the needs and requirements of the Company as a result of the streamlining and simplification process.

Pursuant to the streamlining and simplification process in line with the Global Restructuring undertaken by the Company, the Company had retrenched a total number of 174 employees, including the Claimant. The Claimant cannot feign ignorance of the Global

Restructuring taking place within the Company.

The Claimant admitted in cross-examination that he was involved in the implementation of the Global Restructuring. In fact, the Claimant in his witness statement admitted too that he came up with a plan to streamline his department operations and that he carried out the Company's instructions to streamline the operations of the Purchasing and Logistics Department.

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In any event, it is to be noted that the law is clear in that there is no legal obligation on the part of the employer to consult his employee before retrenchment or give advance warning to the employee on the possibility of retrenchment.
Malaysia Shipyard & Engineering Sdn. Bhd Johore Bharu v. Mukhtiar Singh (1991) 1 ILR 626 at p 627F-H. Ekran Berhad v. Chan Chun Kit (2012) 1 ILR 606 at para 47048 p 622. Alan Arena Management Sdn. Bhd v. Norfadzilah bt Surip & Anor (2011) 2 ILJ 440 at p 452H-1.

In addition to retrenchment of its employees, the NXP's Board of Management, did not receive payment of incentive bonus payments for performance year 2008 and there was a global freeze on salary reviews/increase in 2009 for all sites of NXP globally. Refer to exhibits NXP-11 and NXP-12 for the Company's internal announcement dated 17th March 2009 and a copy of the Company's parent company's announcement respectively.

The Claimant himself also admitted in cross-examination that the Company did carry out cost-cutting measures, more specifically those set out in QA6 to COWS1 in 2008.

For LIFO to be applicable, there are 2 conditions to be satisfied, and that is, firstly, the rule applies only to the category to which the retrenched workers belong, and secondly, the rule operates within the establishment in which the retrenchment is to be made. There is no dispute that Claimant was the only manager in the Purchasing and Logistics Department. There is no other manager in the category or department to which the Claimant belonged.
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In cross-examination, the Claimant admitted that all that is left of the Purchasing and Logistics Department after he left the Company are as per the organisation charts set out in Tabs 16 and 16 of COB2. There is therefore no dispute that there was never a replacement in the Claimant's previous managerial position at the Company.

The other manager with a job grade of G70 similar to the Claimant's previous job grade, whose job functions as the Head of Quality & Facilities was also pursuant to the Global Restructuring surplus to the needs of the Company and accordingly terminated by the Company. It is to be noted that the Head of Quality & Facilities (John Lim) had initially joined the Company in April 2004.

As regards the Claimant's contention and submission regarding LT Chin and alternative position that ought to have been offered to the Claimant, the Company submits the following:
a) Firstly, the points regarding LT Chan and alternative position as set out in the Claimant's submissions in paragraphs 5(4), 5(5), 5(6), 6(9) and 6(10) were never put to the Company's witnesses. Accordingly, following the mandatory rule in Browne v Dunn (where a party must put its case to the other side), the Claimant's submission on this area should be disregarded. b) Aik Ming (M) Sdn. Bhd v. Chang Ching Chuen (1995) 2 MLJ 770 at p 795F-G.

Be it as it may, the Company's witnesses gave evidence of the following: i. That LT Chan had always been part of the NXP group from the time he joined in June 1997 until April 2011. He had always been in the engineering

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department of the NXP group and was retained as manager of the Company's Engineering Department. This is not challenged or dispute by the Claimant. ii. Whereas the Claimant admitted in cross-examination that albeit that he had an engineering qualification from the United Kingdom, out of his 14 years of service with the Company, his last 5 years of service was not in the engineering fields but rather in the purchasing and logistics function of the Company.

iii.

The Claimant also admitted in cross-examination that apart from his engineering degree, he had no other professional qualification in the fields of human resources department, accounting and finance or legal.

iv.

COW2 who is the Company's Human Resources Manager, gave clear and unchallenged evidence that at the time of the termination of the Claimant, there was no role in the Company that the Claimant could have filled, and this status remains the same until today.

It is established that the law permits the employer to depart from the LIFO procedure if he has sound and valid reasons to do so.

In the case of WRP Asia Pacific Sdn. Bhd v. Siow Kim Kee & 7 ors (2012) 2 ILJ 229 at paragraphs 29 p 243C-D, the Industrial Court held that the Company's prerogative in its reorganization of its business extends to selecting the best candidates to be retired. In the case, the Court held that the Company had the right to retain the more experienced person in the business albeit that the more experienced person was more junior in terms of years of service with the Company.

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In the case of Lim Yu Chen v. Steadtler Marketing Sdn Bhd (2012) 1 ILJ 296 at p 306, the Court held that if the retrenched worker's job can be performed by those who were not retrenched, it means that the retrenched worker is surplus to the needs of the employer, and that the Industrial Court, being a Court of equity and good conscience, is constrained to give greater weight to the interests of the respondent Company in achieving the objectives of its organizational structuring.

Further, in the case of Newbridge Networks Sdn. Bhd v. Christie Devanand Alishegam (2012) 2 LNS 0359 at a13, the Court accepted the Company's restructuring in removing the added tier of supervision (which is very much similar to the Claimant's complaint in this case).

In the case of Alam Arena Management Sdn. Bhd v. Norfadzilah bt Surip & Anor (2011) 2 ILJ 440 at page 452, that:
The question of the comparative senior or junior status of a workman for applying the principle of 'last in, first out' had to be determined with reference to the workmen working in the same category of employment, and therefore, for example, in retrenchment on the employee working as a fitter, at the time of retrenchment, seniority is determined on the strength and length of each workman acting in the category of fitters, and not on the length of service of the workman in a difference category.

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As such, the Court held that it cannot interfere with the right of the Company to select the best and able candidates to be retained by the Company.

It is not dispute that full retrenchment benefits in accordance with the Employment (Termination and Lay-Off Benefits) Regulations 1980, as set out in the retrenchment letter dated 22nd December 2008 and the annexure to the retrenchment letter, was paid to the Claimant upon termination of his service. In additional to the retrenchment benefits, the Claimant was also paid 2 months salary in lieu of the notice period, his annual leave encasement and salary and car allowance for the entire month of December 2009, although his services was terminated on 22nd December 2008.

In view of the aforesaid, it is clear that the termination of the Claimant's services was entirely bona fide and that the Claimant was entirely redundant and surplus labour to the needs of the Company.

Conclusion Based on the totality of the evidence as adduced both oral and documentary and upon a consideration of the submission of the parties, this Court having borne in mind s.30(5) of the Industrial Relations Act 1967 acting in equity and good conscience and on a balance of probabilities finds that the Company had discharged its burden of proving that the Claimant was dismissed with just cause and excuse.

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In the premise, the Claimant's claim that he was dismissed without just cause or excuse is hereby dismissed.

HANDED DOWN AND DATED THIS 12 DECEMBER 2012

(HAPIPAH BINTI MONEL) CHAIRMAN INDUSTRIAL COURT OF MALAYSIA AT KUALA LUMPUR

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