In its recent decision in Aw Yeong Leong Sim v. Air Products Malaysia Sdn Bhd [2025] MELRU 335, the Industrial Court dismissed a claim of unfair dismissal, holding that the Post-Retirement Fixed Term Contract is a genuine fixed term contract of employment that expired by effluxion of time. The Court highlighted that employees lose their lien on permanent roles upon reaching retirement age and therefore cannot claim permanent status.

Preface

The Claimant was employed by the Company as a plant supervisor until his retirement on 18/04/2021, when he reached the statutory retirement age of 60 under the Minimum Retirement Age Act 2012. Following his retirement, the Claimant requested to continue working, and the Company agreed to employ him under a fixed term contract to facilitate the transition of the Claimant’s role to his successor and to hire a replacement for the successor’s vacated post. This post-retirement fixed term contract was renewed 4 times without breaks, culminating in a final renewal ending on 30/09/2022. The Company declined to renew the contract further as a replacement for the Claimant’s successor had been found. The Claimant argued that the non-renewal amounted to unfair dismissal.

The Claimant’s Arguments

The Claimant argued that the uninterrupted renewals demonstrated the Company’s reliance on his services as a permanent employee, rendering the Post-Retirement Fixed Term contract a facade for permanent employment.

He further argued that his duties, salary, and benefits remained identical to his pre-retirement role. This continuity, he claimed, proved the Company’s intent to retain him indefinitely.

The Company’s Arguments

The Company argued that the Claimant’s post-retirement employment was explicitly temporary, tied to the specific purpose of training the Claimant’s successor and hiring a replacement for the successor’s vacated post, with renewals necessitated by hiring delays. The purpose of the Post-Retirement Fixed Term Contract and its 4 renewals was communicated to the Claimant by his superior.

The Company further argued that the Post-Retirement Fixed Term Contract and its 4 renewals explicitly stated their fixed-term nature and included a “completion bonus” (distinct from the annual bonuses given to permanent employees). 

The Company also argued that post-retirement employment is discretionary, and retirees lose lien on permanent roles.

Court’s Analysis and Decision

The Industrial Court evaluated the genuineness of the Post-Retirement Fixed Term Contract under the following principles propounded by the Federal Court in Ahmad Zahri Mirza Abdul Hamid v. AIMS Cyberjaya Sdn Bhd [2020] 6 CLJ 557:

1. The intention of the parties.
2. Employer’s subsequent conduct during the course of employment.
3. Nature of the employer’s business and nature of the work which an employee is engaged to perform.

In essence, the Industrial Court found the Post-Retirement Fixed Term Contract genuine for the following reasons:

1. The Post-Retirement Fixed Term Contract and its 4 renewals were temporary in nature for a specific purpose of training the Claimant’s successor and hiring a replacement for the successor’s vacated post.
2. The purpose of the Post-Retirement Fixed Term Contract and its 4 renewals was communicated to the Claimant beforehand.
3. The Post-Retirement Fixed Term Contract and its 4 renewals explicitly stated their fixed-term nature.
4. The 4 renewals were justified by delays in hiring a replacement for the successor’s vacated post, and the Company ceased renewals once the purpose was fulfilled. 
5. The completion bonus offered and paid under the Post-Retirement Fixed Term Contract and its 4 renewals differed from permanent employee’s annual bonus, reinforcing the temporary nature of the Claimant’s role.

The Industrial Court rejected the Claimant’s argument that uninterrupted renewals implied permanency, citing Robert Henry Hawkins v. Rusch Sdn Bhd [2010] 4 ILR 175, which held that continuous renewals alone cannot convert fixed term contracts into permanent ones.

The Industrial Court emphasized that employees lose their lien on permanent roles upon retirement and therefore cannot claim permanent status [as per Zakaria bin Ismail v. Eastern Pacific Industrial Corporation Berhad [2017] MELRU 857; Tai Kon Lee v. Tanco Switchgear (Malaysia) Sdn Bhd [2019] MELRU 2817; Tajul Ahmad Idris Nor Yusof v. Rahman Hydraulic Tin Sdn Bhd [2024] MELRU 597; Sahathevan Narissaman v. International School of Kuala Lumpur [2021] 2 ILR 62].

Ultimately, the Industrial Court dismissed the Claimant’s case, ruling that his Post-Retirement Fixed Term Contract ended lawfully by effluxion of time under a genuine fixed-term contract. The Company had no obligation to renew the contract indefinitely, and the Claimant failed to prove mala fide intent or disguised permanent employment.

Conclusion

The Industrial Court’s decision underscores the importance of clear contractual terms and transparent communication in fixed term employment arrangements, particularly post-retirement. Employers must justify temporary roles with legitimate business needs, while employees should understand the limitations of such contracts to avoid unrealistic expectations.

Key Takeaways for Employers and Employees

1. Clarity in Fixed Term Contracts: Employers must explicitly outline the temporary purpose when offering fixed term contracts. Ambiguity in documentation can lead to disputes and imply permanency. Communicate clearly with employees about the nature of post-retirement roles to avoid misunderstandings.

2. Continuous Renewals: Repeated renewals of fixed term contracts do not automatically convert them into permanent employment. Courts require additional proof of intent to establish permanency.

3. Differentiate Benefits: Employers should offer different benefits to distinguish fixed term employees from permanent employees.

4. Understand Post-Retirement Realities: Employees lose their lien on permanent positions upon reaching retirement age. Post-retirement contracts are discretionary and temporary, even if renewed multiple times. Employers are not obligated to indefinitely extend / renew fixed-term contracts post-retirement, even if the employee desires continued employment. Employees should seek clarity on contract terms and renewal conditions before accepting post-retirement roles. Employees must recognize that post-retirement fixed term contracts lack the security of tenure, regardless of renewal frequency.

5. Employer Prerogative: Employers retain the right to organize their workforce, including terminating temporary contracts upon fulfilling their purpose. Employees cannot demand indefinite employment post-retirement, as this could hinder opportunities for other workers and burden employers.

Authored by: Bong Lep Siong

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