Case Updates

Case Update: Federal Court Distinguishes Fixed Term Contract and Permanent Employee

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INDUSTRIAL RELATIONS
Contract of employment – Fixed term contract – Permanent employee – Unfair and unjust dismissal claim – Does a contract of employment which is renewed successively without application by the employee and without any intermittent breaks in between, a permanent employment?

Ahmad Zahri Mirza Abdul Hamid v AIMS Cyberjaya Sdn Bhd
[2020] 1 LNS 494, Federal Court
- see the grounds of judgment here

Facts The appellant/claimant (the ‘appellant’) was invited to join, invest and then became a shareholder of the AIMS Data Centre 2 Sdn Bhd (ADC). In 2009, the appellant received a letter of appointment for the position of Consultant and a contract for consultancy services from ADC for a fixed term of 12 months. Following to this, the appellant was granted another letter of appointment as Vice President Product Development of ADC and would be entitled for performance bonus scheme for both positions. Subsequently, the appellant’s contracts were renewed for 12 months from 2009 to 2013, with the same terms and conditions. In 2013, ADC was consolidated into AIMS Cyberjaya Sdn Bhd (the ‘respondent’). In view of the company structure, the appellant was re-designated to assume the position of Vice President, Product, & Solutions in the respondent, with the same terms and conditions of his previous contracts. However, upon his renewal of the contract, the appellant was offered further employment without the performance bonus scheme, but he was not agreeable to it. He then informed the respondent that he refused to accept their new offers. The respondent then gave the appellant two months’ notice of expiry of his contract and informed him that he will be released early from his employment. The reconciliation attempts before the Industrial Relations Department failed and the matter was subsequently referred to the Industrial Court for adjudication. The Industrial Court held that the appellant was a permanent employee of the respondent and the purported “fixed term contracts” were not genuine fixed term contracts and the appellant’s dismissal was without just cause or excuse. The Industrial Court awarded back wages of 24 months and compensation of 1½ month salary for each year of the appellant’s service in lieu of reinstatement. Dissatisfied with the award of the Industrial Court, the respondent filed a judicial review application to quash the Industrial Court’s award. The High Court dismissed the respondent’s application for judicial review. The Court of Appeal allowed the respondent’s appeal and set aside the decision of the High Court and the award of the Industrial Court. Hence, this appeal.

Issue The main issue in this case was whether the appellant was employed on a fixed term contract or was a permanent employee of the respondent at the material time?

Held In allowing the appeal, the Federal Court held that the appellant’s contract of employment beginning with ADC before being terminated under the respondent, was not one off, seasonal or temporary employment. It was on going and continuous employment without a break from 2009 to 2013. The Court further stated that the Court of Appeal erred in not recognising the industrial law principle of lifting/piercing the corporate veil in the circumstances and the ongoing nature of the appellant’s contract of employment with both the companies.

ZUL RAFIQUE & partners
{15 July 2020}