How Zheng Hong v Air Asia Berhad (W-01(A)-683-11/2024)

INDUSTRIAL COURT OF MALAYSIA ... RESPONDENTS CORAM: AZMI BIN ARIFFIN, JCA AHMAD FAIRUZ BIN ZAINOL ABIDIN, JCA EVROL MARIETTE PETERS, JCA GROUNDS OF JUDGMENT 10/06/2026 14:34:09 Kand. 47 10 June 2026 ------------------------------------------------------------------------------------------------------------------------------------ 2 Introduction [1] This was an appeal against the decision of the learned High Court Judge who had dismissed the Appellant’s application for judicial review to quash the award of the Industrial Court that held that the Appellant’s retrenchment by the First Respondent was with just cause and excuse. Factual background [2] The Appellant was employed by the First Respondent as a co-pilot from 30 June 2009, and was later promoted to Senior First Officer sometime in May 2012. He served the First Respondent for a total of 10 years and 11 months, and his last drawn basic salary was MYR5,500, plus productivity and sector meal allowances. [3] On 18 March 2020, the Malaysian government imposed the Movement Control Order (“MCO”) due to Coronavirus Disease 2019 (“COVID-19”), severely restricting air travel. The First Respondent held two town hall meetings on 29 May 2020 and 4 June 2020, informing staff of financial difficulties and the need for retrenchment. [4] On 5 June 2020, the Appellant was informed by the First Respondent, during a Zoom call meeting, that he would be retrenched. In response, the Appellant proposed taking two years of unpaid leave as an alternative, but the proposal was immediately rejected. [5] On 7 June 2020, the First Respondent issued a notice of retrenchment to the Appellant, stating that his employment would 10 June 2026 ------------------------------------------------------------------------------------------------------------------------------------ 3 terminate with effect from 14 June 2020 due to severe financial difficulties faced by the First Respondent. [6] On 11 June 2020, the Appellant requested a further meeting with the First Respondent. When he sought clarification as to why he had been selected for retrenchment, he was informed by the First Respondent that the selection was based on the “Best Fit Rule”. [7] The Appellant then filed a representation pursuant to section 20(3) of the Industrial Relations Act 1967 (“Industrial Relations Act”). In May 2023, the Second Respondent (“the Industrial Court”) dismissed the Appellant’s claim, holding that the retrenchment had been carried out with just cause and excuse. [8] The Appellant then filed a judicial review in the High Court, which was dismissed in October 2024 with costs. [9] Hence, this Appeal to the Court of Appeal. Issues [10] The central issue for determination in this Appeal was whether the Appellant’s retrenchment had been carried out bona fide. In addressing that overarching question, we distilled the following sub-issues for consideration:

Whether the learned High Court Judge had erred in upholding the Industrial Court’s finding that the First Respondent had proved genuine financial hardship; 10 June 2026 ------------------------------------------------------------------------------------------------------------------------------------ 4

Whether the learned High Court Judge had erred in holding that departure from the “Last In, First Out” principle was justified; and

Whether the learned High Court Judge had erred in holding that non-compliance with the Code of Conduct for Industrial Harmony 1975 was justified. [11] This Appeal was unanimously allowed for the following reasons. Contentions, evaluation, and findings Whether High Court Judge erred in holding that First Respondent had proved genuine financial hardship [12] It is a fundamental principle of industrial law that the burden of proving that a dismissal was with just cause and excuse rests squarely on the employer as expounded by cases such as Zurina Yusoff v A & A Travel & Tours Sdn Bhd [2021] 2 LNS 1477 and Goon Kwee Phoy v VJ & P Coats (M) Bhd [1981] 2 MLJ 129. [13] A crucial issue in this Appeal was the identification of the relevant financial position against which the retrenchment exercise was to be assessed, namely whether regard should be had to the financial standing of the First Respondent, AirAsia Berhad, or that of its parent company, AirAsia Group Berhad (“AAGB”). [14] The First Respondent’s case, which was accepted by both the learned Industrial Court Chairman and learned High Court Judge, was premised primarily on the severe financial crisis experienced 10 June 2026 ------------------------------------------------------------------------------------------------------------------------------------ 5 during the COVID-19 pandemic, by AAGB, instead of the First Respondent. [15] In support of its position, the First Respondent relied heavily on AAGB’s audited financial statements for the year ending 31 December 2020, which recorded a net loss of MYR3.95 billion. Evidence was also adduced showing that 96% of the fleet operated by the First Respondent had been grounded and that passenger traffic in the second quarter of 2020 had declined by 98%. Further reliance was placed on AAGB’s first quarterly report for the period ending 31 March 2020, released on 8 July 2020, which reflected a loss before tax of MYR967 million. [16] We were unable to accept the First Respondent’s argument for the following reasons. In our view, the financial difficulties faced by AAGB could not automatically be attributed to the First Respondent merely because the latter is a subsidiary within the same corporate group. The two entities are distinct legal persons with different business activities. While the First Respondent is engaged in the provision of air transport services, AAGB operates principally as an investment holding company involved in, among others, licensed money lending and information technology development. The doctrine of separate legal personality is well established in authorities such as Salomon v Salomon & Co Ltd [1897] AC 22, Pamol (Sabah) Ltd & Anor v Joseph bin Paulus Lantip & Ors [2012] 5 MLJ 616 and MLGH (Sabah) Sdn Bhd v Rainbow Bay Sdn Bhd [2023] 5 MLJ 597. Consistent with that principle, the consolidated accounts of AAGB had not necessarily reflected the true financial position of the First Respondent within the group. 10 June 2026 ------------------------------------------------------------------------------------------------------------------------------------ 6 [17] In fact, the evidence before this Court suggested that the First Respondent had remained financially sound immediately prior to the retrenchment of the Appellant in June 2020. The Appellant drew attention to the First Respondent’s audited financial statements for the year ending 31 December 2019, which recorded a profit of MYR560.458 million. This was further confirmed by the testimony of the First Respondent’s own Chief Financial Officer, who accepted that the First Respondent had been profitable in 2019. [18] More importantly, although the retrenchment took effect in June 2020, the First Respondent had failed to produce any of its contemporaneous quarterly financial reports, whether audited or unaudited, for the first and second quarters of 2020 to demonstrate that it was suffering losses at the material time. [19] Despite this evidential gap, the learned High Court Judge relied substantially on AAGB’s consolidated financial statements and the accounts for the year ending 31 December 2020. In our view, that amounted to a material error of both law and fact. [20] The learned High Court Judge further relied on the finding that the First Respondent had contributed between 80% and 85% of AAGB’s earnings as a substitute for direct proof of the First Respondent’s own losses. Such a conclusion was speculative, as the losses suffered by AAGB could equally have arisen from its other subsidiaries or business operations. In the absence of contemporaneous evidence showing that the First Respondent itself was in financial distress during the relevant period, we were not satisfied that the First Respondent had discharged its burden of 10 June 2026 ------------------------------------------------------------------------------------------------------------------------------------ 7 proving genuine financial hardship. The retrenchment was, therefore, premature and unjustified. Whether High Court Judge erred in holding that departure from LIFO was justified [21] The “Last In, First Out” (“LIFO”) principle is a long-established industrial relations guideline used when an employer must retrench workers due to redundancy. It simply means that the most recently hired employees should be the first to be retrenched, while longer-serving employees should be retained wherever possible. [22] Reference was made to the Indian Supreme Court in Swadesamitran Ltd v Their Workmen AIR 1960 SC 762, in particular the following statement made by Justice PB Gajendragadkar, which has been repeatedly cited with approval in Malaysia: It may be conceded that if a case for retrenchment is made out it would normally be for the employer to decide which of the employees should be retrenched; but there can be no doubt that the ordinary industrial rule of retrenchment is I last come first go', and where other things are equal this rule has to be followed by the employer in effecting retrenchment. [Emphasis added.] [23] It is important to understand the rationale underpinning the LIFO principle. The principle exists to promote fairness and equity, protect employees against discriminatory selection, and ensure transparency and objectivity in the implementation of retrenchment exercises. [24] We are mindful, however, that the LIFO principle is not immutable. The Federal Court in several cases including Dynacraft Industries Sdn Bhd v Kamaruddin bin Kana Mohd Sharif & Ors [2012] 9 CLJ 10 June 2026 ------------------------------------------------------------------------------------------------------------------------------------ 8 21 have consistently held that an employer may depart from the LIFO principle for valid and cogent reasons. [25] However, it must be noted that the burden of proving those valid reasons lies squarely on the First Respondent. This has been held in several cases including Ng Chang Seng v Technip Geoproduction

(M) Sdn Bhd & Anor [2021] 1 CLJ 365, where it was held by Lee Swee Seng JCA (as he then was) in the following passage: [19] Each time a workman is retrenched and he perceives it as an unlawful termination, he is entitled to make a reference under s. 20(1) of the Industrial Relations Act 1967 and should the matter proceed further to the Industrial Court then the burden is on the employer to show that the retrenchment has been done bona fide following established principles and practices with the result that the termination of the employee has been for just cause and excuse. [Emphasis added.] [26] The employer, therefore, must show that: a) The selection criteria was objective (not subjective or vague); b) The selection criteria was applied uniformly to all employees in the same category; c) The selection criteria was not arbitrary or capricious; and d) That the decision to retrench was made bona fide, and not to victimise any particular employee. 10 June 2026 ------------------------------------------------------------------------------------------------------------------------------------ 9 [27] The mere assertion that a performance-based system was employed cannot, by itself, justify a departure from the LIFO principle. Such a departure must be founded upon reliable and cogent evidence demonstrating why the employee concerned should be selected ahead of more junior employees. Although factors such as poor performance, disciplinary misconduct, or a lack of necessary skills may warrant a departure from the LIFO principle, these considerations must be supported by objective records and credible evidence. Furthermore, fairness requires that the employee be informed of the alleged shortcomings and given a reasonable opportunity to address or improve them before they are invoked as grounds for retrenchment. [28] In the present case, the First Respondent’s Best Fit Rule selection criteria was based on an internal merit/demerit system. In our view, the following features of such system had rendered it arbitrary and unfair. [29] Medical leave and performance as demerit: The Appellant was contractually entitled to 22 days of medical leave. Notwithstanding this entitlement, the First Respondent factored the Appellant’s medical leave record into its Best Fit Rule assessment and deducted points on that basis. [30] The First Respondent contended that the demerit system was not the sole or decisive factor in the Appellant’s retrenchment. It argued that the Industrial Court had relied on a range of considerations in arriving at the Appellant’s “Poor” and “Needs Improvement” ratings, including prior admonishments, warning letters, and what it characterised as excessive medical leave. According to the First 10 June 2026 ------------------------------------------------------------------------------------------------------------------------------------ 10 Respondent, medical leave was not treated in isolation but formed part of a cumulative performance assessment spanning four years. [31] We were, however, unable to accept this contention insofar as it concerned the Appellant’s medical leave and alleged poor performance, for the following reasons. [32] First, the documents served on the Appellant with regard to his alleged poor performance were routine performance ratings that never indicated his medical leave would later be used to retrench him. He received no warning that his employment was in jeopardy, and, therefore, could not have known, when he took leave in 2016 through 2019, that those absences would be deployed against him in 2020. Absent such notice, he was deprived of any opportunity to adjust his conduct or mount a meaningful response. [33] As held in Ng Chang Seng v Technip Geoproduction (M) Sdn Bhd & Anor, an employer must act fairly before resorting to dismissal: training must be provided for remediable deficiencies, and a show-cause process with an opportunity to respond must be given where they are not. The First Respondent did neither. Instead, it invoked the Best Fit Rule as a retrospective justification, without affording the Appellant the procedural safeguards industrial law requires. [34] Secondly, the First Respondent's own witness admitted she did not know how the Appellant could have improved his record of not taking medical leave. This admission exposed the fundamental flaw in treating medical leave as a performance metric. Medical leave is not a skill to be improved; it is a contractual entitlement and, for pilots, an essential safety safeguard. If the First Respondent itself could 10 June 2026 ------------------------------------------------------------------------------------------------------------------------------------ 11 not articulate how the Appellant was expected to "improve," then it necessarily followed that the decision to penalise him on such basis was inherently unjust. [35] Thirdly, reliance on past medical leave was inherently retrospective and punitive. The Appellant was not retrenched because his position was genuinely redundant, but because the First Respondent had reassessed previously sanctioned absences and re-characterised them as adverse performance indicators. In our view, this so-called Best Fit Rule operated as a colourable device to justify termination, not as a bona fide redundancy exercise. [36] In gist, the Appellant was denied the most basic elements of procedural fairness: he was not warned, not trained, not told the criteria, not given an opportunity to respond, and not afforded any chance to improve. For all these reasons, we were of the view that the Appellant's dismissal by the First Respondent was without just cause or excuse. [37] Discrepancies: The Appellant and his witness identified several pilots who were ranked below the alleged cut-off point on the 2019 performance list, yet remained employed by the First Respondent, while the Appellant was retrenched. Based on the Company's calculation of 533 total co-pilots and 119 selected for retrenchment, the cut-off point was position 414, meaning those ranked 415 to 533 should have been retrenched. However, specific pilots with rankings of 447, 451, 475, 476, 477, and 481 continued their employment with the First Respondent. When questioned, the First Respondent’s witness could not explain why these lower-ranked pilots were 10 June 2026 ------------------------------------------------------------------------------------------------------------------------------------ 12 retained, admitted she did not know where the cut-off point was, and conceded that the ranking lists for 2016 to 2018 (which were part of the selection criteria) were not produced before the court. [38] In our view, the inability of the First Respondent’s witness to provide any coherent explanation for this discrepancy was significant. It suggested that the criteria relied upon were either selectively applied or not genuinely adhered to at all. [39] In a retrenchment exercise, particularly one said to be driven by objective performance metrics, consistency in application is essential to demonstrate bona fides. The presence of employees who fell below the alleged threshold but were nevertheless retained undermined the credibility of the First Respondent’s asserted methodology and supported the inference that the retrenchment was not carried out in a bona fide manner. [40] Lack of transparency: The First Respondent admitted that the selection criteria was an internal management decision, that employees were not informed of it, and that the Appellant was effectively “kept in the dark”. [41] In our view, this lack of transparency was highly significant. A retrenchment exercise which purports to rely on objective selection criteria must necessarily be transparent and capable of scrutiny. Where the criteria are undisclosed and known only to management, affected employees are deprived of any meaningful opportunity to understand, challenge, or improve upon the standards allegedly being applied to them. 10 June 2026 ------------------------------------------------------------------------------------------------------------------------------------ 13 [42] This secrecy, when viewed together with the reliance on matters such as the Appellant’s medical leave history, reinforced our conclusion that the exercise lacked the hallmarks of a bona fide retrenchment process. Rather than reflecting a fair and objective assessment, the selection process appeared opaque, subjective, and susceptible to arbitrary application. [43] It was also crucial to bear in mind the observation of SK Das J in Hariprasad v. Divelkar AIR [1957] SC 121, that retrenchment means “the discharge of surplus labour or staff by the employer for any reason whatsoever otherwise than as a punishment inflicted by way of disciplinary action”. In the present case, the manner in which the Appellant was selected gave the unmistakable impression that the retrenchment exercise had been used as a substitute for disciplinary action. [44] In our view, the learned High Court Judge had, therefore, erred when he agreed with the learned Industrial Court Chairman the selection criteria employed by the First Respondent was “reasonable and just”. The reliance on undisclosed criteria, the penalisation of lawful medical leave, and the inconsistent application of the alleged cut-off point collectively pointed towards a process that was punitive in nature rather than a bona fide redundancy exercise. Whether High Court Judge erred in holding that non-compliance with CCIH was justified [45] The Appellant contended that the learned Industrial Court Chairman had failed to give due consideration to the Code of Conduct for Industrial Harmony 1975 (“CCIH”), a position which was 10 June 2026 ------------------------------------------------------------------------------------------------------------------------------------ 14 subsequently endorsed by the learned High Court Judge. The First Respondent, however, maintained that the CCIH did not carry the force of law and merely served as a non-binding guideline. [46] The CCIH is an agreement made between the Ministry of Human Resources (then known as the Ministry of Labour and Manpower), the Malaysian Council of Employers' Organisations (the predecessor to the Malaysian Employers’ Federation), and the Malaysian Trades Union Congress. Its stated aim is "to lay down principles and guidelines to employers and workers on the practice of industrial relations for achieving greater industrial harmony". [47] Paragraph 20 of the CCIH requires an employer, where redundancy is likely, to take positive steps to avert or minimise retrenchment, including reduction of hours, re-training, or transfer. The paragraph reads:

In circumstances where redundancy is likely an employer should, in consultation with his employees' representatives or their trade union, as appropriate, and in consultation with the Ministry of Labour and Manpower, take positive steps to avert or minimise reductions of workforce by the adoption of appropriate measures such as:

limitation on recruitment;

(ii) restriction of overtime work;

(iii) restriction of work on weekly day of rest;

(iv) reduction in number of shifts or days worked a week;

reduction in the number of hours of work; (vi) re-training and/or transfer to other department/ work. [Emphasis added.] 10 June 2026 ------------------------------------------------------------------------------------------------------------------------------------ 15 [48] The First Respondent relied on several authorities to argue that the CCIH was not mandatory in nature, and that the weight to be accorded to any non-compliance rested within the discretion of the learned Industrial Court Chairman and the learned High Court Judge. [49] While there was some merit in the First Respondent’s submission, guidance may nevertheless be drawn from the decision in Ng Chang Seng v Technip Geoproduction (M) Sdn Bhd & Anor in considering the application of the CCIH, which observed as follows: [91] While the Code of Conduct may not have the force of law, it is still the gold standard by which a company's action may be measured against to see if the whole exercise of retrenchment had been carried out bona fide and that every attempt had been made to explore alternatives before the termination on account of retrenchment. [92] While the Code of Conduct is not statute law it nevertheless has some legal sanction as a document that the Industrial Court should have regard to when making its award as clearly spelt out on s. 30(5A) of the IRA as follows:

In making its award, the Court may take into consideration any agreement or code relating to employment practices between organizations representative of employers and workmen respectively where such agreement or code has been approved by the Minister. [93] The Code of Conduct was an agreement reached in February 1975 between the then Ministry of Labour and Manpower (now called the Ministry of Human Resource), the Malaysian Council of Employers' Organisation (now known as the Malaysian Employers Federation) and the Malaysian Trades Union Congress ("MTUC"). Its aim is to lay down principles and guidelines to employers and workers on the practice of industrial relations for achieving greater industrial harmony. [Emphasis added.] 10 June 2026 ------------------------------------------------------------------------------------------------------------------------------------ 16 [50] In the present case, the evidence revealed that the First Respondent made no genuine attempt to explore any alternative measures prior to the retrenchment. No proposals were made in respect of salary reductions, reduced flying hours, unpaid leave, or redeployment to an alternative position. On the contrary, although the Appellant himself volunteered to take two years’ unpaid leave, such proposal was summarily rejected during a Zoom meeting that apparently lasted no more than five minutes. [51] Against that backdrop, the learned High Court Judge’s observation that “what alternative position is there to offer when the entire company came to a standstill” misses the essential point. The obligation imposed by the CCIH is not merely to identify available vacancies, but to demonstrate that alternatives were genuinely sought and conscientiously considered in good faith before resorting to retrenchment. On the evidence before us, the First Respondent had failed to do so. This lent further support to the conclusion that the retrenchment exercise was not undertaken bona fide. Observations of recent Industrial Court cases [52] We could not overlook the significance of two recent Industrial Court decisions concerning the retrenchment of pilots within the airline industry, namely, Wong Zi Chuang v AirAsia X Berhad [2025] 1 ILJ 1 and Fong Wai Ming v Malindo Airways Sdn Bhd [2025] ILJU 561. [53] Although not binding on this Court, these cases were significant because they involved substantially similar factual matrices, in particular, COVID-19 pandemic retrenchments, reliance on Best Fit 10 June 2026 ------------------------------------------------------------------------------------------------------------------------------------ 17 Rule selection criteria, departure from the LIFO principle and alleged non-compliance with CCIH. [54] The Appellant contended that the reasoning and conclusions reached in these authorities demonstrated that his own retrenchment was similarly effected without just cause or excuse. [55] In Wong Zi Chuang v AirAsia X Berhad, the claimant was a pilot employed by AirAsia X Berhad, a sister company of the First Respondent, who was retrenched in June 2020 shortly after the imposition of the MCO arising from the COVID-19 pandemic. In that case, AirAsia X Berhad departed from the LIFO principle and instead adopted a Best Fit Rule in selecting pilots for retrenchment, notwithstanding that the claimant had served the airline and its affiliates for almost 12 years, and had expressed willingness to go on furlough. [56] The Industrial Court allowed the claim and made several significant findings. First, although an employer may depart from the LIFO principle, any alternative method of selection must, nevertheless, be bona fide, fair, reasonable, and free from arbitrariness or caprice. Secondly, the Industrial Court held that the Best Fit Rule did not enjoy any superior legal standing over the LIFO principle, and that decisions made pursuant to such rule remained subject to judicial scrutiny. Thirdly, the Industrial Court found that the justification advanced by the employer, namely, the need to create a “lean team” of pilots, rang hollow given that the retrenchment exercise was carried out barely three months after the MCO, at a time when almost all flights had been grounded save for rescue missions. In such circumstances, the Industrial Court observed that any 10 June 2026 ------------------------------------------------------------------------------------------------------------------------------------ 18 purported selection process was inherently arbitrary, as it remained uncertain which pilots were genuinely redundant. [57] The Industrial Court in Wong Zi Chuang v AirAsia X Berhad further found that the employer’s selection exercise was in substance driven largely by past disciplinary and performance records, yet none of the employer’s witnesses could satisfactorily explain how the claimant’s position had in fact become redundant. The Industrial Court, therefore, concluded that the employer had failed to establish genuine redundancy and that the retrenchment was not undertaken in a bona fide manner. The claimant’s dismissal was accordingly held to be without just cause or excuse. Significantly, the Industrial Court also noted that there was no compelling reason for the employer to rush into retrenchment by June 2020 when all pilots were effectively grounded and stood on equal footing, and that the claimant’s repeated willingness to accept furlough arrangements had simply fallen on deaf ears. [58] The Appellant had also relied on Fong Wai Ming v Malindo Airways Sdn Bhd. In that case, the claimant, a senior B737 captain employed by Malindo Airways, was retrenched while 25 other B737 captains were retained. The employer justified its departure from the LIFO principle on grounds of “performance, safety and disciplinary” considerations, yet failed to produce the list of retained pilots or explain the basis upon which certain pilots were retained while others were selected for retrenchment. [59] The Industrial Court likewise allowed the claim and identified several serious procedural deficiencies. First, the Industrial Court reaffirmed that the obligations imposed on an employer under the CCIH prior 10 June 2026 ------------------------------------------------------------------------------------------------------------------------------------ 19 to retrenchment included meaningful consultation, consideration of alternatives to retrenchment, adherence to the LIFO principle unless objectively justified otherwise, and the provision of adequate notice. Secondly, the evidence overwhelmingly demonstrated that there had been no meaningful consultation, no disclosure of any objective selection matrix, and no satisfactory explanation as to why employees junior to the claimant remained employed after her termination. Thirdly, the Industrial Court found that the employer had deviated from the LIFO principle without establishing any special circumstances to justify such departure, contrary to well-established industrial relations principles. Fourthly, no evidence was adduced to show that alternative positions, redeployment opportunities, or that voluntary separation schemes had ever been offered to the claimant. Finally, despite the employer continuing to operate limited flights well into late 2020, no evidence was tendered to establish that the claimant’s specific role had permanently ceased to exist. [60] In our view, the parallels between those cases and the present appeal were unmistakable. Here too, the First Respondent failed to engage in any meaningful consultation with the Appellant, failed to disclose any objective selection matrix, and failed to produce complete performance rankings, relying only on the 2019 list while omitting the rankings for the preceding years from 2016 to 2018. The First Respondent also departed from the LIFO principle without satisfactorily substantiating the reasons for doing so, and failed to offer the Appellant any alternative role, redeployment opportunity, or meaningful consideration of his proposal to go on extended unpaid leave. 10 June 2026 ------------------------------------------------------------------------------------------------------------------------------------ 20 [61] Furthermore, the Appellant’s witness identified specific pilots with lower rankings who nevertheless remained employed by the First Respondent. This bore striking resemblance to the “two classes” situation identified in Fong Wai Ming v Malindo Airways Sdn Bhd, where certain captains were retained while the claimant alone was retrenched without any intelligible explanation. Such circumstances raised legitimate concerns as to the fairness, consistency, and transparency of the retrenchment exercise undertaken by the First Respondent. [62] We were mindful that both Wong Zi Chuang v AirAsia X Berhad and Fong Wai Ming v Malindo Airways Sdn Bhd were decided subsequent to the judgment of the learned High Court Judge in the present case. We were equally cognisant that, as decisions of the Industrial Court, they did not bind this Court and could serve only as persuasive authorities. Nevertheless, we considered it both appropriate and instructive to examine the reasoning adopted in those cases, given the striking similarities between them and the present appeal. [63] Each case arose within the aviation industry during the unprecedented challenges occasioned by the COVID-19 pandemic and concerned retrenchment exercises undertaken pursuant to the same Best Fit Rule methodology. More significantly, each involved comparable procedural shortcomings in the implementation of the retrenchment process. [64] Having carefully considered the analyses undertaken in those decisions, we found the reasoning therein to be both cogent and persuasive. In each instance, the Industrial Court concluded that the 10 June 2026 ------------------------------------------------------------------------------------------------------------------------------------ 21 retrenchments had not been carried out with just cause or excuse, notwithstanding the financial and operational difficulties faced by the employers. In our judgment, the material facts and circumstances of the present appeal are sufficiently analogous to warrant the application of the same principles. Bearing these considerations in mind, we were unanimously of the view that the reasoning adopted in those cases ought, with equal force, to apply to the present appeal. Conclusion [65] In the upshot, based on the aforesaid reasons, and after judicious consideration of all the evidence before this Court, submissions of both Parties, and Grounds of Judgment of the learned High Court Judge and award of the learned Industrial Court Chairman, we unanimously found that the learned High Court Judge had erred in law and fact in upholding the award of the Industrial Court. [66] Accordingly, we allowed this Appeal and made the following orders: a) The Appeal was allowed with costs in the amount of MYR50,000 (subject to allocatur); b) The decision of the learned High Court Judge was set aside; c) The award of the Industrial Court was quashed; and d) A total of MYR147,000 for back wages* (MYR92,400) and compensation in lieu of reinstatement** (MYR55,000) was awarded to the Appellant in the following manner: 10 June 2026 ------------------------------------------------------------------------------------------------------------------------------------ 22 i) Back-wages* – By virtue of section 30(6A) of the Industrial Relations Act, the Court is required to take into consideration the factors set out in the Second Schedule when making an award in respect of a reference under section 20(3) of the Industrial Relations Act. Paragraph 1 of the Second Schedule to the Industrial Relations Act expressly provides that any award of back-wages shall not exceed twenty-four months' back-wages from the date of dismissal, based on the employee's last-drawn salary. Accordingly, the maximum back-wages that may be awarded in the present case is twenty-four months. Items MYR Full back-wages – (24months x 5,500 monthly salary) 132,000 Appellant’s three months’ salary (3 x MYR5,500) which was paid by the Respondent 16,500 Amount after deducting three months’ salary of 16,500 from full back-wages of 132,000 115,500 Further deduction of 20% from 115,500 for securing part-time employment, as paragraph 3 of the Second Schedule to the Industrial Relations Act expressly provides that where there are post-dismissal earnings, a percentage of such earnings, to be decided by the Court, 23,100 10 June 2026 ------------------------------------------------------------------------------------------------------------------------------------ 23 shall be deducted from the full back-wages. Final amount of back-wages due after deducting 23,100 from 115,500 92,400

(ii) Compensation in lieu of reinstatement** – As reinstatement was not an appropriate remedy in the present case, the Appellant was entitled to compensation in lieu of reinstatement. The established practice of the Industrial Court pursuant to Practice Note 3 of 2019 is to assess such compensation at the rate of one month's last-drawn salary for each completed year of service. The Appellant had completed 10 years of service and was, therefore, entitled to compensation in the amount of MYR55,000 in lieu of reinstatement equivalent to 10 months' salary. Dated: 10 June 2026 ………….…SIGNED…………… (EVROL MARIETTE PETERS) Judge of the Court of Appeal Malaysia 10 June 2026 ------------------------------------------------------------------------------------------------------------------------------------ 24 Counsel: For the Appellant – Lai Chee Hoe, Devyinah Ganesalingam, Low Yen Hau; Messrs Chee Hoe & Associates. For the Respondents – Wendy Lam Mei Kuan, Wong Jia Ee; Messrs C Chong W Lam.