Retrenchment: Not so clear cut after all

Retrenchment: Not so clear cut after all
PHOTO: Kenneth Lim

WE are living in uncertain times where jobs are no longer expected to last a lifetime. These days, it's the white collar workers - or the professionals, managers and executives (PMEs) - who sweat about jobs, compared to blue-collar workers. Not only are PMEs most at risk of losing their jobs, it also takes them longer to re-enter the market.

One incident fresh on our minds this year was the Surbana Jurong furore, where the company sacked 54 employees, citing poor performance in an e-mail circulated to staff.

As job security is at the top of workers' minds of late, we get specialists to answer some burning questions we have on retrenchment and layoffs, as well as what workers should know about it.

Read also: The Surbana issue: Were the workers sacked for poor performance or retrenched?

Retrenchment vs layoff

There has been confusion about the different terms being bandied about, such as "retrenchment" and "layoff". Often used interchangeably, a layoff is simply an informal term for the termination of employment.

Jenny Tsin, partner and joint head of employment practice, WongPartnership, explains that whether it's a temporary layoff or retrenchment, it is due to no fault on the employee's part, and instead arises from business reasons such as downsizing or business re-organisation.

Contrary to popular belief, retrenchment benefits are not an automatic given. Susan de Silva, consultant and co-head of the employment group in Asia Pacific, Bird & Bird, says: "Retrenchment benefits are not compulsory unless such benefits have been included in the employment agreement or collective agreement."

So while the Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment recommends certain retrenchment benefits for employers, it is not entrenched in the law.

These recommendations include giving a longer notice period, redundancy benefits for employees with at least two years of service guided by a "prevailing norm" of two weeks to one month's salary per year of service, a pro-rated payment for employees with less than two years of service, and help for affected staff to look for alternative employment.

Not every company paid retrenchment benefits to eligible employees in 2015. One out of 10 did not.

However, Patrick Tay, Member of Parliament for West Coast GRC and secretary-general of the National Trades Union Congress (NTUC), says that retrenchment benefits may be incorporated as a term in the employee's contract or in the collective agreement (CA) negotiated by the union.

"If the employee is working in a unionised company, a clause on retrenchment is usually provided in the CA. This may specify a retrenchment benefit quantum or require the company to negotiate with the union on the quantum at the time of retrenchment."

Read also: Surbana Jurong explains terminations in e-mail to staff

Scenario 1:

If a company gave me a poor performance appraisal abruptly even though my track record has been good and tells me to resign before they terminate me, is that possible?

Ms Tsin says it depends on the facts of the case, as well as specific terms of the employment contract. She pointed out that Tripartite Guidelines on Fair Employment Practices suggest that dismissals should be undertaken only in terms of documented poor performance or misconduct.

"Having said that, most employment contracts will provide that the parties are legally allowed to end the contract with notice. If such notice is given by the employer, the employee's legal remedies may be limited."

Both lawyers agreed that no employee can be compelled to resign.

Says Ms de Silva: "If an employee finds that he or she is forced to 'resign', such a resignation is likely to amount to a constructive dismissal for which the company will be liable to pay the employee everything it would have had to pay if the employee was properly terminated by the company."

She adds that employees who are covered by the Employment Act may also seek redress by filing a claim of unfair dismissal without just cause or excuse. The company will have the burden of showing the Ministry of Manpower that the company was justified in terminating the employee on the grounds of poor performance.

Scenario 2:

Due to restructuring, my company switches my department and makes me do a job I am unequipped for without training. When I do badly, my boss suggests that this is not the place for me and insinuates that I should leave. Is there any legal recourse for me?

Mr Tay says that the new job must be within the employee's job scope as stated in the employment contract, otherwise it would amount to a breach of contract by the employer. Assuming that the new job is within the employee's job scope, the employee must be provided with sufficient training to perform the work.

"In extreme cases where the employer behaves so unreasonably that the employee is forced to resign, the employer may be liable for constructive dismissal," he adds.

If the employee was terminated subsequently on account of being unequipped to do the new job, Ms de Silva says, it may be argued that there has been a breach of the implied term of mutual trust and confidence. However, she warned that such a claim would not be an easy one to mount and would be highly fact-dependent.

Read also: Why does Singapore not have a mandatory retrenchment benefits scheme?

Future gazing

Looking ahead, Mr Tay expects to see PMEs being the majority of those affected by retrenchments again in 2017. Among them, he says, those age 40 and above are more vulnerable as they take a longer time to re-enter the workforce and may end up long-term unemployed.

He adds: "That said, there are those in their 30s who are also not spared . . . We urge employers to use retrenchment as a last resort and if they do so, to do it fairly, responsibly and progressively in compliance with the guidelines."

Apart from what must be done under the law, Ms de Silva points out that how a retrenchment is carried out is just as important.

"Being sensitive to the human element of everyone involved, in particular ensuring that affected employees are treated with respect and dignity, can go a long way towards reducing the potential for disputes."


This article was first published on April 3, 2017.
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