KUALA LUMPUR: AirAsia Bhd has failed in its bid to overturn an Industrial Court ruling ordering it to pay RM268,620 in compensation and back wages to a former pilot who resigned after being placed on prolonged unpaid leave during the Covid-19 pandemic.
High Court judge Datuk Azizan Md Arshad dismissed the airline’s appeal, ruling that its decision to place Eric Koh on indefinite unpaid leave without a clear date for his return to work amounted to a fundamental breach of his employment contract.
Azizan said an employee’s agreement to temporary unpaid leave did not give an employer the right to withhold wages indefinitely.
“Consent to a temporary measure implemented in exceptional circumstances cannot, without more, be converted into consent to an indefinite deprivation of remuneration and suspension of the employee’s contractual obligation to work,” he said in his grounds of judgment dated Sept 28.
The judge said although AirAsia had legitimate business reasons to restructure its workforce and reduce costs during the pandemic, such circumstances did not automatically allow it to change the fundamental terms of an employee’s contract.
He said the airline’s argument that it had implemented a structured approach in recalling furloughed pilots and adjusting their salaries did not justify its actions.
“A company may adopt a structured and consistent policy, but that policy cannot, by itself, authorise a departure from a contractual obligation,” he said.
Azizan also rejected AirAsia’s argument that Koh had voluntarily accepted the unpaid leave arrangements and salary reductions.
He said the pilot’s earlier participation in temporary furlough arrangements did not mean he had permanently surrendered his contractual rights.
The court also found that promises made during a town hall meeting in November 2021, including assurances that pilots would be reactivated in 2022 without further unpaid leave, were legally binding.
Azizan said AirAsia could not simply disregard those assurances after Koh had continued his employment based on them.
He also rejected the airline’s reliance on its financial difficulties, saying it failed to provide sufficient evidence of its inability to honour the promises.
The judge said AirAsia Bhd and its parent company, AirAsia Group Bhd, were separate legal entities and the airline had to demonstrate its own financial inability to fulfil its obligations.
“The existence of a parent company does not immunise the subsidiary from the consequences of its own conduct in the employment relationship,” he said.
He further dismissed the airline’s argument that Koh had resigned voluntarily, saying the circumstances surrounding his departure showed that he had left because of the company’s actions.
The judge said the Industrial Court had correctly found that the prolonged withholding of wages and indefinite unpaid leave amounted to constructive dismissal.
He upheld the RM268,620 award, comprising 24 months of back wages after a 20 per cent deduction for Koh’s earnings following his dismissal, and three months’ compensation in lieu of reinstatement.
AirAsia was also ordered to pay RM5,000 in costs.
On Nov 7, 2024, Industrial Court chairman S. Vanithamany ruled in Koh’s favour, finding that he had been constructively dismissed after enduring prolonged unpaid leave and substantial salary reductions.
The High Court found no error in the Industrial Court’s decision and upheld the award.
Lawyers Wendy Lam and Wong Jia Ee represented AirAsia, while Leow Ho Eng appeared for Koh.