LAZADA LAYOFF LAPSE: Should companies notify unions about retrenchments?

The company reportedly let go of nearly 100 employees early January without notifying the allied workers union.

Lazada’s failure to notify the Food, Drinks and Allied Workers Union (FDAWU) of its January retrenchments has thrown the spotlight on companies’ obligations in managing major workforce reductions.

Generally speaking, there is no legal requirement for companies to consult unions about retrenchments. However, the scenario changes when the company is unionised, said Ian Lim, TSMP Law Corporation’s head of Employment and Labour.

Lim pointed out that Lazada is covered by the Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment, which states that a unionised company must notify its pertinent union on retrenchments first before the employees.

This is the rule if the company is unionised, said Lim, “unless any memorandum of understanding or collective agreement [entered into by the company] stipulates exactly how the union must be notified.”

Following reports of Lazada’s layoffs, the National Trades Union Congress (NTUC) did not take the company’s move lightly.

“We are extremely disappointed in this move by Lazada. NTUC would like to reiterate that it is critical for companies to work with their union to ensure that a fair and equitable process was carried out to safeguard the interests of all workers, especially our Singaporean core,” it said.

Apart from adhering to the Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment, NTUC underscored that companies must also observe guiding principles outlined in the Fair Retrenchment Framework and ensure “openness, transparency and consultation with unions and workers” in the event of retrenchment.

Whilst the tripartite advisory is not a statute, it is something for which administrative sanctions can be levied by the authorities such as the Ministry of Manpower (MOM).

Administrative sanctions can include curtailment of work pass privileges, which Lim said may be a big deal for large employers like Lazada.

The FDAWU had stated earlier that it has escalated Lazada’s layoff lapse to the MOM.

Given that Lazada is unionised, Lim warned that the FDAWU can even drag the company to the Industrial Arbitration Court (IAC) should there be a labour dispute arising from the retrenchment.

Whilst there is no obligation for companies not unionised to consult with a union about workforce reductions, they have the responsibility to inform the MOM as mandated by the Employment (Retrenchment Reporting) Notification 2019.

“You now have to notify the MoM of every retrenchment, as long as you have at least 10 employees,” Lim stated.

He stressed that the whole industrial relations landscape is more concerned with the spirit of fairness. For this reason, the IAC is empowered to decide matters on this basis of fairness, as opposed to just purely what the contract requires.

“This is why you have had unionised companies still finding themselves subject to consequences even though a collective agreement had not yet been entered into,” Lim said.

When asked if the Lazada layoffs may stir changes in the tripartite advisory, Lim said: “It’s possible it may ultimately be passed into law.”

So far, however, there has been no sign of moving the advisory into legislation just yet.

On-going negotiations

As for Lazada, it has already issued an apology to the NTUC and the FDAWU for failing to abide by the notification process with regard to its January retrenchment and has agreed to cooperate with the union to do what may be best for the workers.

The company also assured the union that they will be “consulted in advance for any future exercises.”

In an email to the Singapore Business Review, an NTUC spokesperson said negotiations between Lazada and the FDAWU are already “in progress.”

Based on an earlier statement, one of the things that FDAWU wants to negotiate further is additional benefits for the retrenched workers as they found the current retrenchment package “unsatisfactory.”