Temporary shut down / forced annual leave

In view of the current economic landscape, I’ve been receiving questions on temporary shut downs more frequently than ever. The big question here is can employers force employees to go on annual leave?

Here are a two common scenarios where this could happen:

  1. Company has a 6 day work week but because production is predicted to go down in the next 2 months, employees are requested to go on leave for 1 day per week (over 2 months) – total force leave = 8 days
  2. Festivals (say Chinese New Year or Hari Raya) falls on 2 working days per week. Company would like to save some cost because nothing much could be done in that week. Employees are forced to go on leave for the entire week – total for leave = 4 days

Ever wonder what goes through an employee’s mind if any one of the above declaration is made? (none of their business if the Company wants to shut down right?)

The legal position

Annual leave has always been considered a right of an employee. Harun Hashim J commented in Dunlop Malaysian Industries Bhd v DMIB Employees Union [1982] 1 ILR 161

Annual leave is usually taken for personal reasons. It is intended for leisure, enjoyment and travel. It should not be enforced on the employee merely to suit the company’s convenience.

In Viking Askim s/b v Nat Union of Companies Manufacturing Rubber Products [1991] 3 CLJ 195, the Court held the following:

If an employee is ready to perform his services during the period covered by his employment contract, he is entitled to wages even though his employer has no work for him.

In applying both the above cases, it appears that employers should not force employees to go on leave nor can they declare unpaid leave for a period of temporary shut down. In a more recent case involving Kesatuan Pekerja-Pekerja Continental Tyre PJ Malaysia Sdn Bhd v Continental Tyre PJ Malaysia [2015] 3 ILR 462, the Company declared a plant shut down in a week where there were 2 public holidays. The Court decided that the days where the employees were forced to go on leave should be paid back to them (or alternatively, 2 days of AL should be granted to them from the date of the decision).

Despite the above, I wouldn’t conclude that there is no possible way out of this predicament. I will be sharing the many practical methods available to an employer in a course entitling ‘Reducing Manpower Cost’ this 4 – 5 April 2016 in Kuala Lumpur. You can contact my colleague, Mr. Alvin Lai at alvin@meca.com.my for further information.

If you are unable to make it for this program and you need urgent assistance, I recommend that you write to me at victor@meca.com.my for further information.