Justice Azmi Ariffin, chairing a three-member bench, said both the Industrial Court and High Court erred by relying on the consolidated losses of parent company AirAsia Group Bhd (AAGB), a separate legal entity from AAB, to justify How Zheng Hong’s purported retrenchment.
Azmi said the separate legal entity principle requires a subsidiary’s financial position be assessed on its own merits, not imputed from its parent company.
He said the decision to retrench How based on group-level losses, without any standalone financial proof from AAB itself, was without legal foundation.
“AAB’s own chief financial officer admitted that the only relevant period to prove financial hardship was Q1 and Q2 of 2020, yet AAB’s quarterly financial statements for those periods were never produced in court,” the judge said when delivering the court’s unanimous decision allowing How’s appeal.
He also said AAB’s reliance on How’s medical leave record as a basis for retrenchment was fundamentally unjust and amounted to a departure from the “last-in, first-out” principle.
“The claimant was contractually entitled to 22 days of sick leave per year. Taking medical leave when unwell is not a performance failure but a safety imperative for pilots, who are legally and professionally obligated to be fit before flying,” he said when delivering his broad grounds of judgment.
Azmi said the employer had retroactively weaponised the “poor” ratings handed down to How four years earlier to justify his elimination, which the Industrial Court and High Court erred in accepting as bona fide.
He said AAB’s “wholesale failure” to adopt any of the measures enumerated in paragraph 20 of the Code of Conduct for Industrial Harmony – such as limiting recruitment, restricting overtime, reducing working hours, or offering retraining and transfer – demonstrated a complete disregard for industrial fairness.
How had stepped forward with a reasonable, good-faith solution by voluntarily offering to take two years of unpaid leave to save his job, Azmi noted.
The judge said it was a “self-sacrificing proposal from a loyal employee to help the company weather the crisis”.
“In our view, the High Court simply deferred to the Industrial Court’s findings instead of asking whether the decision was perverse, irrational, or based on irrelevant materials,” he added.
The court, which also comprised Justices Ahmad Fairuz Zainol Abidin and Evrol Mariette Peters, ordered AAB to pay an additional RM50,000 in costs to How, now employed as a pilot by another airline company.
The appeals court’s award of RM147,400 comprised 24 months’ back wages and compensation in lieu of reinstatement of one month’s wages for each of his 10 years of service.
It also took into account a previous payment of RM16,500 made by AAB as compensation for retrenchment and RM23,100 in post-dismissal earnings.
How joined AAB in 2009 but was retrenched in June 2020.
The Industrial Court dismissed How’s case in 2023, a decision which the High Court upheld when disallowing his application for judicial review last year.
Lawyers Lai Chee Hoe, Deyvinah Ganesalingam and Low Yen Hau appeared for How, while Wendy Lam and Wong Jia Ee acted for AAB.