Retrenchment: Is the “best fit” policy fair?

“The best-fit policy is a new trend that reflects the flexibility within the industrial relations landscape in times of economic crisis and underscores the importance of applying objective criteria in retrenchment exercises.The enforcement of the travel and border restrictions in many countries during the Covid-19 pandemic drastically reduced flight demands, leading to financial adversity in airline companies.

However, the unprecedented challenges forced the companies to rethink this approach. Instead of LIFO, an airline company opted for a “best fit” selection criteria during its retrenchment exercise.The LIFO principle is designed to afford a healthy safeguard against discrimination of the employees in retrenchment exercises by ensuring that the most junior employees are retrenched before the more senior ones in the same category.

The Company defended its position, citing financial difficulties due to the global economic changes in the Asia Pacific region and the Covid-19 pandemic. The Industrial Court supported the Company’s deviation from LIFO, acknowledging the Company’s need to maintain an efficient team capable of weathering financial adversity.

Nevertheless, the Industrial Court has consistently upheld the Company’s “best fit” policy as a fair and pragmatic approach given the unprecedented challenges posed by the pandemic. However, the potential negative impact on employees who lose their jobs during times of uncertainty should not be overlooked.While employers can choose to depart from LIFO and adopt their own criteria, it also means that the selection criteria are subject to further evaluation by the court.

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