Position of Fixed-Term Contract Employment: Muhammad Fawaid Daud v Airod Sdn Bhd [2024] MELRU 836 & A Gilbert D’Cruz v Sapuraacergy Sdn Bhd & Anor [2021] MLJU 2010
Fixed-term employment contracts in Malaysia are agreements that specify a set duration of employment. These contracts are commonly used in industries like manufacturing, aviation, and construction, where project-based work and fluctuating market demands require flexibility.
However, some employers misuse these contracts to disguise permanent employment relationships, raising concerns about fairness and worker rights.
The key question is then: Can an employee who has been led to expect permanent employment simply be dismissed when their “fixed-term” contract ends?
- To answer the question above, the cases of Muhammad Fawaid Daud v. Airod Sdn Bhd0F[1] and A Gilbert D’Cruz v. Sapuraacergy Sdn Bhd & Anor1F[2] will shed light on the issue.
# Muhammad Fawaid Daud v. Airod Sdn Bhd
In this case, the claimant has been employed by the company for over 32 years. For the last 20 years, Muhammad Fawaid was employed under a series of fixed-term contracts, each renewed regularly.
His duties, work conditions, and long tenure led him to believe that his position was effectively permanent, despite the contractual language. The company eventually did not renew his contract, which prompted the claimant to file for unfair dismissal, claiming he had an implied expectation of permanent employment.
The Industrial Court’s Decision:
The court ruled that the fixed-term contracts were not genuine but a disguise for permanent employment. Daud’s 20 years of continuous service under automatic contract renewals without any need for application reflected the employer’s intent to retain him as a permanent employee.
The court emphasized that Daud’s work was integral to the company and not temporary or project-based. The dismissal was deemed without just cause, leading to an award of RM1,137,192 in back wages and compensation.
# A Gilbert D’Cruz v. Sapuraacergy Sdn Bhd & Anor
In this case, Gilbert D’Cruz had worked for Sapuraacergy Sdn Bhd for over seven years, during which he was employed under various fixed-term contracts. Over the years, his duties and responsibilities remained largely the same, and the company did not provide any clear indication that the contracts were meant to be temporary.
At the end of his final contract, D’Cruz’s employment was not renewed, and he filed a claim for unfair dismissal, arguing that his continuous employment and the nature of his work had created an implied expectation of permanent employment.
The Court of Appeal’s Decision:
The Court of Appeal ruled that Gilbert D’Cruz was a permanent employee and not engaged under a genuine fixed-term contract. It found that his contracts were continuously renewed without any application on his part, spanning seven years, and that his work was integral to the employer’s operations and not project-based.
The Court also noted that he was allowed to work for 45 months without a formal contract, further demonstrating that the employer treated him as a permanent employee. Evidence, including internal emails, showed the employer’s intention to retain him permanently, even though the plans did not materialize.
Based on these findings, the Court quashed the Industrial Court’s decision, which had failed to consider relevant facts, and remitted the case for assessment of damages.
The principles established from Muhammad Fawaid Daud (supra) and A Gilbert D’Cruz (supra)
From the two cases above, in determining whether a “fixed-term” contract is genuinely temporary or permanent, the Court will look at three key considerations:
1. Intention of the Parties
The intention of the parties holds the most weight, as it forms the foundation of the employment relationship. In Muhammad Fawaid Daud, although the claimant was placed under fixed-term contracts for over 20 years, the employer failed to demonstrate that these contracts reflected a genuine temporary need. Instead, the employer’s actions implied a long-term commitment to keeping Daud until retirement.
Similarly, in A Gilbert D’Cruz, the employer’s failure to clearly state a temporary purpose for the fixed-term contracts, despite automatic renewals for over seven years, demonstrated an intention inconsistent with genuine fixed-term employment. The Court concluded that these contracts were a façade to bypass the rights of permanent employees.
2. Employers’ Subsequent Conduct
The employer’s behavior during the employment relationship is critical in assessing whether the fixed-term contracts were genuine.
In Muhammad Fawaid Daud, the automatic renewal of contracts without requiring applications from the claimant employee indicated the employer’s intention to maintain a continuous, long-term relationship. The Court noted that this pattern of renewals, combined with the absence of a clear reason for the fixed-term nature, undermined the claim of temporary employment.
Similarly, in A Gilbert D’Cruz, the employer allowed the claimant employee to continue working for 45 months without a contract, further evidencing their reliance on his services in a manner typical of permanent employees. Such conduct led the Court to infer an intent to establish a permanent relationship, despite the contracts’ fixed-term labels.
3. Nature of the Work and Job Responsibilities
The Court also examines the nature of the work performed by the employee. If the employee’s duties are integral and continuous, rather than project-based or temporary, it indicates a permanent role.
In Muhammad Fawaid Daud, the Court highlighted that Daud’s duties, which are managing technical documentation and quality assurance for aircraft maintenance, were integral to the company’s operations, further supporting the conclusion that his work was not seasonal or temporary.
In A Gilbert D’Cruz, the claimant was involved in all of the company’s projects, locally and internationally, without any specific or temporary assignment, which the Court found inconsistent with genuine fixed-term employment.
In both cases, the Court’s analysis of these factors led to the conclusion that the employees were, in effect, permanent employees, despite the forms and labels of their contracts.
Unlawful Dismissal: What Employees Can Do to Protect Their Rights
If an employee is wrongfully dismissed after years of continuous fixed-term contracts, they may have grounds for an unfair dismissal claim.
To challenge this, employees should gather evidence of their ongoing employment, including contract renewals and job responsibilities. Employees under disguised permanent contracts are entitled to the same protections as those in permanent positions, and they can claim severance or damages if dismissed unjustly.
For Employers: Defending the Lawfulness of a Dismissal
Employers who believe a dismissal was lawful must ensure that the fixed-term contract genuinely reflects the temporary nature of the employment, with clear terms outlining its end date or specific task completion.
If the dismissal stems from a fixed-term contract’s expiration, employers should be able to demonstrate the intent behind the contract and avoid the impression of permanent employment.
Continuous contract renewals without clear temporary intent can open the door for legal challenges, so proper documentation and strict adherence to labor laws are essential to mitigate the risk of unfair dismissal claims.
Conclusion
In conclusion, the analysis of the two cases of Muhammad Fawaid Daud (supra) and A Gilbert D’Cruz (supra) underscores the importance of clearly outlining employer-employee expectations from the start, and that the Courts will look into the substance of the employment relationship, rather than relying solely on the form of a contract.
Courts are becoming more vigilant in identifying disguised permanent employment relationships, ensuring that workers are protected against unfair dismissal under the guise of fixed-term contracts. Whether you are an employee facing unlawful dismissal or an employer navigating the complexities of contract renewals, understanding your rights and obligations is crucial.
If you find yourself in a situation where your employment relationship may be mischaracterized, or if you’re unsure about the legal standing of your fixed-term contracts, do not hesitate to seek expert legal guidance. If you have any questions or queries, please contact our Dispute Resolution Partner, Mr. Brandon Cheah (brandon@nzchambers.com) or our Pupil-in-Chambers, Mr. Alif Mustaqim.
Authors:
- Brandon Cheah
- Alif Mustaqim
References:
[1] [2024] MELRU 836
[2] [2021] MLJU 2010