Post by : Rohit Dhiman

AirAsia Bhd has received a final opportunity to challenge a court ruling that found the airline had unlawfully retrenched former co-pilot How Zheng Hong during the Covid-19 pandemic. The Federal Court in Putrajaya has allowed AirAsia to bring its appeal forward after finding that several important legal questions raised by the airline require further consideration. The case could now examine how companies should justify employee retrenchment during financial difficulties and what factors employers can legally consider when selecting workers for job cuts. The latest development follows an earlier Court of Appeal decision that ordered AirAsia to pay RM147,400 to How after finding that his dismissal was unlawful. The Federal Court's decision to grant leave does not mean that AirAsia has won the case. It means the airline has been allowed to present its legal arguments before the country's highest court.

Why AirAsia Is Challenging the Earlier Ruling

AirAsia has raised seven questions of law for consideration by the Federal Court. One of the central issues is whether a company can use the financial position of its wider corporate group when explaining why employees had to be retrenched. The airline wants the Federal Court to consider whether the financial condition of the entire corporate group can be taken into account, or whether the court should look only at the financial position of the specific company that employed the worker. This issue is important because companies operating under large corporate groups may have different financial positions from their parent or related companies.

Court's Earlier Finding on AirAsia's Finances

How Zheng Hong joined AirAsia in 2009 and was retrenched in June 2020, when the aviation industry was facing major disruption because of the Covid-19 pandemic. AirAsia had relied on financial difficulties to support the retrenchment. However, the Court of Appeal later found that the lower courts had made an error by relying on the consolidated losses of AirAsia Group Bhd, which was a separate legal entity. The Court of Appeal said AirAsia had not produced its own financial statements for the first two quarters of 2020 to properly establish that the company itself was facing the financial difficulties claimed. This became one of the key reasons behind the decision in How's favour.

Medical Leave Also Becomes a Major Issue

Another important question before the Federal Court concerns the use of an employee's medical leave record during a retrenchment exercise. AirAsia wants the court to consider whether statutory or contractual medical leave can be treated as a negative factor when an employer decides which employees should be retrenched. The Court of Appeal had previously criticised the use of How's medical leave record as a factor in his selection for retrenchment. The court found it unfair for the airline to rely on his medical leave when making the decision to end his employment. The issue could have wider implications for how employers consider legally approved medical leave when making decisions about staff reductions.

Could Unpaid Leave or Salary Cuts Have Been Considered?

The Federal Court will also consider whether employers should first look at other options before retrenching employees. These options can include unpaid leave, salary reductions or other cost-cutting measures. This question is particularly relevant because the case arose during the Covid-19 period, when airlines and other businesses were dealing with major financial and operational pressure. The court will have to consider the legal requirements surrounding such alternatives and whether an employer must explore them before proceeding with retrenchment.

Previous Performance Ratings Under Question

Another legal issue involves employee performance records. AirAsia has asked the Federal Court to consider whether an employer can use an employee's previous performance ratings during a retrenchment exercise without first giving the employee an opportunity to improve. This means the court may examine how past performance records should be treated when an employer is selecting workers for retrenchment. The issue could also clarify the balance between an employer's right to make business decisions and an employee's right to fair treatment during a workforce reduction.

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What Happened to How Zheng Hong?

How joined AirAsia in 2009 and worked for the airline for around 11 years before losing his job in June 2020. His retrenchment took place during one of the most difficult periods for the global aviation industry, when international travel was heavily affected by the pandemic. How challenged the decision and eventually took the matter through several levels of the Malaysian legal system. The Industrial Court initially rejected his claim. The High Court also ruled against him. The case later reached the Court of Appeal, where the outcome changed. In April, the Court of Appeal unanimously ruled in How's favour and concluded that AirAsia had unlawfully retrenched him.

Court of Appeal Ordered RM147,400 Payment

Following its decision, the Court of Appeal awarded How RM147,400. The amount included back wages and compensation instead of reinstatement. The court also took into account compensation that How had previously received as well as income he earned after losing his job. The ruling therefore did not simply provide the former pilot with the full amount of wages that might otherwise have been claimed. The final figure was calculated after considering payments and earnings already received.

Federal Court Gives AirAsia Another Legal Route

At the Federal Court hearing, AirAsia's lawyer Wendy Lam argued that the questions raised by the airline involved important legal principles and matters of public interest. Two judges on the three-member panel agreed that the seven questions should be considered. Justice Rhodzariah Bujang, who chaired the panel, and Justice Lee Swee Seng allowed AirAsia's application.

Justice Azimah Omar disagreed with the decision.

The ruling means the Federal Court will now have the opportunity to examine the legal questions raised by AirAsia and decide whether the earlier Court of Appeal decision should stand.

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