Case Name: Barat Estates Sdn Bhd & Anor v. Parawakan Subramanian & Ors [2000] 1 MLRA 404 CA
Court: Court of Appeal
Date: 26 May 2000
Key Issue:
Whether an employer is obligated to indemnify employees under Section 13(1) of the Employment Act 1955 (EA) for failure to give notice of termination when the business is sold, despite the employees continuing employment with the new owner under similar terms.
Facts of the Case
- The 336 respondents were employees of the first appellant on two estates, Ulu Yam Estate and Bukit Beruntung Estate. The second appellant managed the estates.
- In September 1990, the first appellant sold both estates to Prospell Enterprise Sdn Bhd.
- The first appellant informed the respondents by letter that the sale would not affect their terms and conditions of service and that their employment would continue as if there had been no change in the employer.
- The new owner, Prospell, also wrote to the respondents offering them continued employment with no change in their terms and conditions, effective from November 7, 1990, which the respondents accepted.
- The respondents later sued the appellants, claiming indemnity under Section 13(1) of the EA on the grounds that the appellants failed to give them notices of termination in accordance with Section 12 of the EA.
- The appellants argued that there was no break in the continuity of the contracts of service, and since the respondents suffered no actual loss of employment, no question of indemnity arose.
- The High Court judge entered judgment for the respondents, being bound by the majority decision in Radtha Raju & Ors v. Dunlop Estates Bhd [1996] 1 MLRA 58.
Issue Decided
The issue before the Court of Appeal was whether the appellants were obliged to indemnify the respondents under Section 13(1) of the Employment Act 1955.
Decision and Reasoning
The Court of Appeal dismissed the appellants’ appeal and affirmed the judgment for the respondents. The court held that the sale of the business constituted a termination of service, and the employer was under a statutory obligation to give notice.The key points emphasizing the notice of termination were:
- Statutory Obligation to Give Notice: Where termination of service is wholly or mainly attributable to a change in the ownership of the business, the employer must give the employee the appropriate period of notice as required by Section 12(3)(f) of the Employment Act 1955.
- Automatic Continuation Not Recognized: The Employment Act 1955 does not recognise the automatic continuation of employment with the new owner of the business.
- Right of Choice: The employer’s duty to give notice is a right conferred upon the employee to receive it, which allows the employee to make a choice about their future employment. Failure to give notice deprives the employee of this right, which the court views as contrary to the constitutional prohibition of forced labour under Article 6(2) of the Federal Constitution.
- Indemnity for Failure to Give Notice: Since the appellants failed in their statutory obligation to terminate the contracts of service by giving the appropriate notice upon the sale of the business, they were obligated to indemnify the respondents to the extent prescribed by Section 13(1) of the EA.
- Evasion Attempt Invalid: The court concluded that the first appellant’s attempt to evade the operation of Sections 12 and 13 of the EA by placing the respondents in continued employment with the new company was without avail.
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