How Zheng Hong v AirAsia Berhad & Anor

Appellant(s): How Zheng Hong

Respondent(s):

• Air Asia Berhad
• Mahkamah Perusahaan Malaysia

• YA Dato' Azmi Bin Ariffin
• YA Dato' Ahmad Fairuz bin Zainol Abidin
• YA Datin Paduka Evrol Mariette Peters

• The appellant, a senior first officer employed by the first respondent for nearly 11 years, was retrenched in June 2020 following the COVID-19 pandemic and the resulting MCO, which severely curtailed air travel operations.
• The first respondent selected the appellant for retrenchment using an internal "Best Fit Rule" merit/demerit system, departing from the LIFO principle, and rejected the appellant's proposal to take two years' unpaid leave as an alternative.
• The Industrial Court dismissed the appellant's claim under s. 20(3) of the Industrial Relations Act 1967, finding the retrenchment was with just cause and excuse; the High Court upheld that decision on judicial review, prompting this appeal.

• Whether the employer had discharged its burden of proving genuine financial hardship justifying retrenchment, given that the financial evidence relied upon pertained to the parent holding company (AAGB) rather than the employer entity itself.
• Whether the departure from the LIFO principle was justified, specifically whether the "Best Fit Rule" selection criteria — which penalised lawful medical leave and was applied inconsistently and without transparency — constituted a bona fide and objective basis for retrenchment.
• Whether non-compliance with the Code of Conduct for Industrial Harmony 1975 (CCIH) was justified, given the employer's failure to genuinely explore alternatives to retrenchment before proceeding with termination.

• The Court held that the employer could not rely on the parent company AAGB's consolidated financial losses to establish its own financial hardship, as the doctrine of separate legal personality requires proof of the employing entity's own financial distress; the absence of contemporaneous quarterly financial statements for the first respondent was a fatal evidential gap.
• The Court found the Best Fit Rule to be arbitrary and procedurally unfair: it penalised the appellant for exercising a contractual entitlement to medical leave, was applied inconsistently (lower-ranked pilots were retained without explanation), and was never disclosed to the appellant, depriving him of any opportunity to respond or improve — rendering the retrenchment effectively punitive rather than a bona fide redundancy exercise.
• The appeal was unanimously allowed; the High Court's decision was set aside, the Industrial Court award was quashed, and the appellant was awarded MYR 147,000 comprising MYR 92,400 in back wages (24 months, less deductions) and MYR 55,000 in compensation in lieu of reinstatement (10 months' salary for 10 completed years of service).