THE year 2020 will be remembered as one of the most challenging periods for the airline industry as travel and border restrictions during the Covid-19 pandemic drastically reduced flight demand, leading to financial adversity.
To keep themselves afloat, airline companies had to make tough decisions to reorganise their business operations and to retrench employees.
Retrenchment became a contentious issue amid the pandemic. Traditionally, the Last-In-First-Out (LIFO) principle guided these decisions, prioritising the retention of employees based on their length of service.
However, the unprecedented challenges forced companies to rethink this approach.
Instead of LIFO, an airline company opted for a best-fit selection criteria during its retrenchment.
While LIFO has been endorsed in the Code of Conduct for Industrial Harmony (CCIH), it is not a strict law.
CCIH has also provided for other objective criteria, such as ability, experience, skill and qualification.
Thus, any departure from the principle must be justified with acceptable or valid reasoning. In a recent Industrial Court case, a co-pilot with 17 years of service without accident alleged wrongful dismissal as the company adopted the best-fit policy in the retrenchment exercise.
The pilot argued that adherence to LIFO would have preserved his job, questioning the fairness of his redundancy while foreign pilots remained employed. The company defended its position, citing financial difficulties due to the global economic changes in the Asia Pacific region and the Covid-19 pandemic.
It underwent a business alignment exercise to retain only a core team of best-fit employees by evaluating pilots' performance ratings and disciplinary records since 2016.
The Industrial Court supported the company's deviation from LIFO, acknowledging its need to maintain an efficient team.
The court noted that selecting employees for retrenchment based on work locations, special skills or qualifications, performance ratings and disciplinary records was justified for the company to depart from the LIFO principle to achieve its goals in the face of a financial crisis.
Further, retrenchment should be guided by objective performance and business needs.
The best-fit policy used by the company during the pandemic has led to legal cases brought by affected employees.Nevertheless, the Industrial Court has consistently upheld the company's best-fit policy as a fair and pragmatic approach given the challenges posed by the pandemic. This new trend reflects the flexibility in the industrial relations landscape in times of economic crisis and underscores the importance of applying objective criteria in retrenchment exercises.
However, the potential negative impact on employees who lose their jobs during times of uncertainty should not be overlooked.
There must be a balance between the competing rights of the employers and employees. While employers can choose to depart from LIFO and adopt their own criteria, it also means that the selection criteria should be subject to further evaluation by the court. So employers are advised to ensure that transparent and fair procedures are implemented and well-documented during retrenchment exercises.
Consequently, companies may need to revisit their retrenchment policies to ensure decisions are justified and balanced between operational needs and fair treatment of employees.
LEONARD YEOH, CHEN MEI YAN
Kuala Lumpur
The views expressed in this article are the author's own and do not necessarily reflect those of the New Straits Times