Employment & Labour Law

Kesatuan Pekerja-Pekerja Airod Sdn Bhd v Airod Sdn Bhd

Citation: Award No. 808 of 2019; Date of Judgment: 27 February 2019; Name of Court: Industrial Court; Source: Industrial Court

INDUSTRIAL COURT OF MALAYSIA

CASE NO.: 28(2)/2-1342/16

BETWEEN

KESATUAN PEKERJA-PEKERJA AIROD SDN. BHD

AND

AIROD SDN. BHD

AWARD NO. 808 OF 2019

BEFORE: YA TUAN FRANKLIN GOONTING - CHAIRMAN; MR NOR AZMIN BIN TAJUL ARIFIN - EMPLOYEES' PANEL MEMBER; MR LOW WEN HAN - EMPLOYERS' PANEL MEMBER

Venue: Industrial Court of Malaysia, Kuala Lumpur

Date of Reference: 23.09.2016

Dates of Mention: 10.11.2016, 19.12.2016, 23.01.2017, 23.02.2017, 23.03.2017, 25.04.2017, 24.05.2017, 07.06.2017, 14.07.2017, 14.08.2017, 23.04.2018, 16.11.2018, 07.12.2018

Dates of Hearing: 23.05.2018, 24.05.2018, 19.06.2018, 27.07.2018, 03.08.2018, 18.10.2018

Reference

[1] This reference under Section 26(1) of the Industrial Relations Act 1967 (the IRA) pertains to the trade dispute between Kesatuan Pekerja-Pekerja Airod Sdn. Bhd (the Union) and Airod Sdn Bhd (the Company) regarding the terms of the proposed 5th Collective Agreement between the parties for the period 1st March 2015 till 28th February 2018.

[2] By the time the hearing commenced the parties had narrowed down the dispute to 3 Articles. The court now proceeds to consider each of these disputed articles.

Article 20 -Salary Structure & Salary Adjustment

[3] The Union's stand is to maintain the status quo from the 4th Collective Agreement, that is, salary structure review every three years, and 8% salary adjustment.

[4] The Company, on the other hand, wants the words "shall" to be changed to "may" so that the article now reads that the Company may review the salaries once every three years, and also proposes a 2% salary adjustment.

[5] The Union's witness, UW-1, testified as follows:

“S: Apakah pendirian Kesatuan mengenai Artikel 20-Salary Structure & Salary Adjustment?

A: Pendirian pihak Kesatuan adalah untuk mengekalkan status quo peruntukan Artikel ini dari Perjanjian Bersama Ke-4. Artikel ini dalam Perjanjian Bersama Ke-4 adalah seperti di mukasurat 148 hingga 149 Union's Bundle of Documents, dibaca bersama dengan Lampiran B di mukasurat 188 Ikatan Dokumen yang sama. Dalam hal ini saya mengesahkan pliding pihak Kesatuan dari perenggan 9 hingga 9.2 SOC.

S: Kenapa pihak Kesatuan masih berpegang kepada cadangan penyelarasan gaji bagi Perjanjian Bersama Ke-5 harus sama pada kadar 8% bagi tujuan Perjanjian Bersama Ke-5?

J: Ini adalah kerana dalam tempoh masa yang berlalu di antara tempoh masa Perjanjian Bersama Ke-4 dan Ke-5, tidak ada sebarang penurunan kos menyara hidup. Malah, harga barangan semakin meningkat secara umum. Oleh yang demikian, pihak Kesatuan berpendapat bahawa kadar penyelarasan gaji harus sama seperti kadar penyelarasan gaji pada 8% seperti dulu. Adalah diperhatikan bahawa bagi tempoh tiga tahun sebelum tempoh Perjanjian Bersama ke-5, iaitu dari tahun 2011 hingga 2014, nilai CP1 telah menaik sejumlah 7.30 poin (iaitu nilai bagi tahun 2014 sebanyak 11.50 tolak nilai tahun 2011 pada 103.20). Data ini adalah seperti dalam cetakan dari Internet, dari laman www.indexmundi.com/facts/malaysia/consumer-price-index.

[6] (i) Cross-examination of UW-1 in respect of the Consumer Price Index (CPI) went as follows:

Q: Saya cadangkan bahawa bila kenaikan gaji 3% setiap tahun dicampur dengan salary adjustment 8% amaun yang dibayar kepada pekerja setiap tahun melampau dan melebihi CP1 dan cukup untuk menyerap kenaikan kos hidup.

A: Tidak setuju. Peratus setiap tahun oleh syarikat kepada pekerja dibayar kerana pangkat kenaikan dan bukan kos hidup.

Q: Setuju anda bahawa sama dengan pekerja, syarikat pun mengalami kenaikan kos?

A: Setuju.

(underlining for emphasis.)

(ii) The court pauses here to observe a contradiction in the Union's position. Is the proposed 8% salary adjustment to meet the rising costs of living or because of "pangkat kenaikan."?

[7] The Company's Head of Finance, COW-2, referred to its audited financial statements and explained that its profit and loss position for the years 2011 to 2016 was in the range of 2%-4% and its cash position at the end of the year is not sufficient to cover the one month operating costs. This performance indicator shows that the Company is facing a tough time to sustain the business. With this downward trend of its finances, the Company does not have the financial capacity to afford the 8% salary adjustment sought by the Union, and the Company may be close down if 8% is maintained.

[8] COW-2 also gave a comparison of the salary structure between that of the Company and the Malaysian Employers Federation (MEF) Salary Survey for Non-Executive staffs (RBD-2 pages 9-24):

Q: Please tell this Honourable Court what is the current average salary of Airod compared to the market practice for grade ICP-3.

A: Currently the average salary of grade ICP-3 of the Company is RM 3,274.00 which is higher than the MEF Salary Survey for Non-Executive 2015, ie by overall year 2014 RM 2,431.00, by overall year 2015 RM 2,455.00 by Non-Manufacturing Sector RM 2,624.00, by location Petaling Jaya/Subang RM 2,621.00 by employment size of 501-1000 employees RM 2,433.00, by Capital Ownership Malaysia RM 2,545.00, by Company's Sales Turn Over RM 100.0-RM 500 million RM 2,493.00 and by Unionsed Companies RM 2,436.00.

Q: Please tell this Honourable Court what is the current average salary of Airod compared to the market practice for grade ICE-2.

A: Currently the average salary of grade ICE-2 of the Company is RM 2,245.00 which is higher than the MEF Salary Survey for Non-Executive 2015, ie by overall year 2014 RM 1,602.00, by overall year 2015 RM 1,733.00, by Non-Manufacturing Sector RM 1,895.00, by location Petaling Jaya/Subang RM 1,809.00, by employment size of 501-1000 employees RM 1,795.00, by Capital Ownership Malaysia RM 1,740.00, by Company's Sales Turn Over RM 100.0- RM 500 million RM 1,963.00 and by Unionsed Companies RM 1,642.00.

Q: Please tell this Honourable Court what is the current average salary of Airod compared to the market practice for grade SL-1.

A: Currently the average salary of grade SL-1 of the Company is RM 1,745.00 which is higher than the MEF Salary Survey for Non-Executive 2015, ie by overall year 2014 RM 1,197.00, by overall year 2015 RM 1,251.00, by Non-Manufacturing Sector RM 1,325.00, by location Petaling Jaya/Subang RM 1,297.00, by employment size of 501-1000 employees RM 1,238.00, by Capital Ownership Malaysia RM 1,328.00, by Company's Sales Turn Over RM 100.0- RM 500 million RM 1,443.00 and by Unionsed Companies RM 1,324.00."

Q: What effect would there be if the Union's request for a 8% Salary Adjustment is allowed?

A: If the Union's request for a 8% Salary Adjustment is allowed, the average salary of grade ICP-3 will increase from RM 3,274.00 to RM 3,535.92 which is way above of the market practice.

Likewise, if the Union's request for a 8% Salary Adjustment is allowed, the average salary of grade ICE-2 will increase from RM 2,245.00 to RM 2,424.60 which is way above of the market practice.

And also, if the Union's request for a 8% Salary Adjustment is allowed, the average salary of grade SL-1 will increase form RM 1,745.00 to RM 1,884.60 which is way above of the market practice."

[9] (i) The Company also adduced evidence of the CPI (RBD-2 pages 2-6) which was not disputed by the Union. The following table shows the CP1 movement from 2010 to 2017:-

Year

2010

2011

2012

2013

2014

2015

2016

2017

CP1

1.7%

3.2%

1.6%

2.1%

3.2%

2.1%

2.1%

3.7%


(ii) The Harun formula for salary adjustment is 2/3 of the CP1 increase for the period of the last collective agreement. The Company's counsel submits that, going by RBD-2 pages 2-6, a 2% of salary adjustment is more than enough to cover and increase in costs of living and the inflationary trends in the general economy.

[10] (i) The Union's counsel points out that, going by the accounts for 2013, the provision for depreciation was RM 13,765,366.00 and for tax it was RM 10,630.000.00, and that as for the Company's liabilities to service loans, these banking facilities were for the purchase of assets/property, to wit, a helicopter, a new hangar, and a full-flight simulator. Counsel submits that capital expenditures and mere provisions should not be taken into account is ascertaining financial capacity of the Company, citing the High Court case of Kesatuan Kebangsaan Pekerja-Pekerja Hotel, Bar dan Restoran Semenanjung Malaysia v MTB Realty Sdn Bhd/Renaissance Melaka Hotel (2003) 6 MLJ 420 where, at page 431, His Lordship Faiza Thamby Chik J, held:-

"Capital expenditures and mere provision should not be taken into account in ascertaining the financial capacity of the respondent. The law in this area is clear i.e. that there should be no deduction for income tax, reserves and depreciation when ascertaining the financial capacity of a Company."

(ii) In the case of Kesatuan Eksekutive Airod v Airod Sdn Bhd (Application for Judicial Review No 25-7-01/2015) the High Court held:-

"The Learned Chairman of the Industrial Court had also committed an error of law when she took into consideration elements in the financial statement that will cause the reduction of the net profit value, such as the depreciation and taxation figures."

This decision was upheld by the Court of Appeal. The Company had then sought leave to appeal to the Federal Court but such leave was not granted.

[11] The court is bound by these authorities. However, the non-taking into account of elements such as depreciation, taxation figures, capital expenditures and reserves are not the only criteria in determining the financial capacity of the Company to pay the 8% salary adjustment. The Company has, through its accounts, shown its balance sheet, operating costs, loss of contracts, and loan liabilities, and these must also be considered, and the court has taken these matters into consideration. The Union, on the other hand, avoided this issue and offered no rebuttal whatsoever. Furthermore the court is required by Section 30(5) of the IRA to act according to equity, good conscience and the substantial merits of the case without regard to technicalities and legal form. Furthermore, sub-section (4) of the same section requires the court to have regard to the public interest, the financial implications and the effect of its award on the economy of the country and on industry concerned, and also to the probable effect in related or similar industries.

COUNSEL

For the Union: Mr. V. K. Raj and Ms. S. P. Devi from Messrs P. Kuppusamy & Co

For the Company: Brigadier General Dato' Fitzgerald J K Augustin from Messrs Fitzgerald Augustin & Co

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