Is a purchaser/transferee of a company in a merger exercise required to offer an employee of the seller/transferor company continuous employment on terms not less favourable than what the employee enjoyed before?
AFFIN BANK BHD V MOHD KASIM @ KAMAL BIN IBRAHIM  SUPP MLJ 106
- Mohd Kasim @ Kamal Bin Ibrahim (“Kasim”) was an employee of Affin-ACF Finance Bhd (“AACF”) which was in the process of being taken over and merged with Affin Bank Bhd (“Affin Bank”) pursuant to a business transfer agreement and a vesting order from the High Court.
- It must be highlighted that Kasim was an employee not governed by the Employment Act 1955.
- Whilst the merger would have automatically ended Kasim’s employment with AACF, Affin Bank had offered Kasim employment on condition that he observed the retirement age of 55 years.
- Kasim’s retirement age was 60 years under the employment contract with AACF, which was sufficient time for Kasim to settle a housing loan he had taken from AACF at non-commercial rates. Affin Bank refused to allow the retirement age to be 60 years in the new employment contract.
- Kasim was unhappy with the Affin Bank’s condition of retirement at 55 years of age and insisted that he should be allowed to retire at age 60.
- Affin Bank however did not yield.
- Kasim then accepted Affin Bank’s offer of employment “under protest” and worked for 8 months, by which time he had attained the age of 55 years and was told to retire.
- Kasim applied to the High Court for an order against Affin Bank that he was entitled to work until the age of 60 and a declaration that Affin Bank was bound by Order 5 in the High Court’s vesting order that required Affin Bank to offer Kasim continuous employment on terms not less favourable than what he had enjoyed under his previous employment with AACF.
- The High Court allowed Kasim’s claims. The Court of Appeal agreed with the High Court.
- Affin Bank then appealed to the Federal Court.
FEDERAL COURT DECISION – APPEAL ALLOWED [MAJORITY DECISION]!
The Federal Court allowed the appeal, set aside the orders of the courts below and held as follows:
- Affin Bank was not obliged to offer Kasim continuous employment on the same terms and conditions that Kasim enjoyed in his previous employment with AACF as the merger automatically terminated Kasim’s contract of employment with AACF.
- The vesting order stating that continuous employment must be offered only applied to employees under the Employment Act 1955.
- Since the Employment Act 1955 does not apply to Kasim, the parties were free to enter into a new contract and Affin Bank was at liberty to offer Kasim terms of employment which were less favourable than Kasim’s previous employment with AACF.
- There is no law in Malaysia governing employment contracts in a merger where the employee is not governed by the Employment Act 1955.
- The court or anyone else has no power to transfer any person against his will from the service of one person to another, because one has the right to choose for himself whom one should serve.