A Factory In Shah Alam Is Closing. Here Is What The Law Gives A Retrenched Worker

About this guide: This explainer uses an incident reported on 2026-07-29 as a starting point. The legal rules below are general; they do not decide anyone's guilt, liability or individual case.

What happened

On 27 to 29 July 2026, Panasonic confirmed it will progressively wind down Panasonic AVC Networks Kuala Lumpur Malaysia Sdn Bhd (PAVCKM), its plant in Shah Alam, as part of a global reorganisation of its audio-visual consumer business. Television production there is due to end around September 2026, Blu-ray Disc player production moves to a Panasonic joint venture in China, Technics hi-fi audio production ends by around the end of February 2027, and the site is expected to stop operating by the end of March 2027. About 400 employees are affected. The company said it is working with the authorities, government agencies and the Electrical Industry Workers' Union on job placement and career transition support.

On 29 July 2026, Selangor Menteri Besar Datuk Seri Amirudin Shari said the state government would work with PERKESO and the Selangor Labour Department (JTK) to decide what interventions are possible, including channelling workers into other manufacturing jobs or other sectors, entrepreneurship training, and job-matching through the state's JobCare carnival tour. In early August the state also arranged for its human resources exco and PERKESO representatives to meet the affected workers directly.

Nothing reported so far suggests any wrongdoing by anyone. This is a company restructuring, announced in advance, with the union and government agencies engaged. That is exactly why it is worth using as a teaching case: the legal framework it sits inside is the same framework that applies to a 12-person printing shop in Klang or a call centre in Penang that decides to close a department next month.

The part most people get wrong is that they treat retrenchment as a negotiation about goodwill. It is partly that. But underneath the goodwill there is a floor set by law, a deadline for payment, a form your employer must file, and a separate insurance scheme you have to claim yourself. If you do not know those four things, you are negotiating blind.

The legal insight: what law applies

Start with the vocabulary, because the words carry different legal consequences. A dismissal is the employer ending your employment for a reason connected to you — misconduct, poor performance. A retrenchment (or redundancy) is the employer ending your employment because the job itself is no longer needed: the plant shuts, the department is merged, the line is moved offshore. A lay-off under the 1980 Regulations is narrower again — it broadly covers being kept off work and unpaid because the employer cannot provide work. Redundancy is a perfectly lawful reason to end a contract in Malaysia. What the law regulates is whether the redundancy is genuine, how you are selected, what you are paid, and what the employer must tell the government.

The money side sits in the Employment (Termination and Lay-Off Benefits) Regulations 1980. The Labour Department (JTKSM) states the minimum scale plainly: 10 days' wages for each year of service if you served less than two years; 15 days' wages per year if you served two years or more but less than five; and 20 days' wages per year if you served five years or more, with incomplete years pro-rated. The usual working formula is monthly wage x 12 ÷ 365 x years of service x the 10/15/20 day rate. JTKSM also states that these benefits must be paid within seven days of the termination taking effect. Generally you need at least twelve months of continuous service with that employer before the entitlement bites.

Here is the trap that catches a lot of executives and engineers. Since 1 January 2023 the Employment Act 1955 applies to essentially anyone on a contract of service, but paragraph 2 of the Act's First Schedule switches off a handful of provisions for employees whose wages exceed RM4,000 a month — and one of the switched-off provisions is section 60J, the very section under which the termination and lay-off benefits regulations are made. In plain terms: if you earn above RM4,000 and you are not in one of the narrow First Schedule categories treated differently, you have no statutory severance formula. Your severance then comes from whatever your employment contract, collective agreement, employee handbook or established company practice provides. Many good employers pay the 10/15/20 scale anyway. They are not obliged to.

Notice is a separate entitlement from severance, and people constantly merge the two. Under section 12 of the Employment Act, if the contract is silent the minimum notice is four weeks if you served less than two years, six weeks for two to five years, and eight weeks for five years or more. Your contract can give more; it cannot give less than the statute where the statute applies. An employer may pay wages in lieu of notice instead of letting you work it. Termination benefits are paid on top of notice pay — not instead of it.

There is a filing duty on the employer that most workers never hear about. JTKSM requires employers to notify the Labour Department of retrenchments arising from company closures or redundancies (reorganisation, reduced production, mergers, technological change, takeovers) using the Employment Retrenchment Notification 2004 form, commonly called Borang PK. Disciplinary dismissals are excluded from this notification. JTKSM states that failure to notify is an offence under section 63 of the Employment Act 1955, carrying a fine of not more than RM50,000 for each offence. Note what this is and is not: it is a reporting obligation so the government can see and respond to job losses. It is not a permission slip, and the Labour Department does not approve or veto a retrenchment through it.

How the employer picks who goes matters. Malaysian industrial jurisprudence expects a retrenchment to be a genuine business decision (bona fide redundancy) and expects selection to be fair — the long-standing reference point being the Code of Conduct for Industrial Harmony, which points to last-in-first-out within the affected category unless there is a sound reason to depart from it. Section 60N of the Employment Act adds a specific rule: where an employer needs to reduce a workforce, a local employee should not be terminated in a particular capacity unless foreign employees in that same capacity are terminated first. None of this makes redundancy illegal. It means a redundancy dressed up to remove one inconvenient person can be challenged.

Then there is the insurance layer, which is entirely separate from anything your employer pays. PERKESO's Employment Insurance System (Lindung Kerjaya), running since 1 January 2018, provides income replacement for insured persons who lose their jobs. PERKESO states you are eligible if you apply within 60 days of the date of loss of employment and meet the contribution qualifying conditions. Qualifying losses include ordinary retrenchment, VSS/MSS, closure due to natural disaster, business bankruptcy or closure, constructive dismissal, and resignation after sexual harassment or threats. Dismissal for misconduct, ordinary voluntary resignation and mandatory retirement do not qualify. Benefits include Job Search Allowance for three to six months depending on your contribution history, Reduced Income Allowance, an Early Re-employment Allowance worth 25% of unpaid JSA if you find work quickly, a training fee of up to RM4,000, and a training allowance of RM10 to RM20 a day. Applications go through the PERKESO EIS portal, and you register with MYFutureJobs for job matching.

If you believe the redundancy is a cover story — your role was refilled a month later under a new title, or you were the only one selected out of an unchanged team — the route is not the Labour Department. It is a representation for reinstatement under section 20 of the Industrial Relations Act 1967, filed with the Industrial Relations Department, and the statute gives you 60 days from the date of dismissal. That deadline is strict and there is no wage cap on who may file. It is a different door, with a different clock, from your severance claim.

How does this impact me?

Say you have been on the line for nine years on RM2,600 a month and the plant closes. Section 60J applies to you because you are under the RM4,000 threshold. Nine years puts you in the 20-days bracket: roughly RM2,600 x 12 ÷ 365 x 9 x 20, which lands in the region of RM15,000, before notice pay, unused annual leave and any balance of salary. You should also get eight weeks' notice or pay in lieu. And that money is due within seven days of your last day, not whenever the finance team gets around to it.

Now say you are a senior engineer on RM7,500 with the same nine years. Section 60J is switched off for you. If your contract and the company handbook say nothing about severance, there is no statutory formula to point at. What you do have is your notice period, your accrued leave, whatever the collective agreement covers if you are in the bargaining unit, and any consistent past practice the company has followed in earlier exercises. This is where asking for the previous exercise's terms in writing genuinely changes the conversation.

Say you are offered a voluntary separation scheme with a package better than the statutory minimum, and a letter to sign that says you release the company from all claims. That is common and often reasonable. But understand the trade: signing usually closes the door on a later unfair dismissal claim. VSS and MSS do still count as a qualifying loss of employment for EIS purposes, so your Job Search Allowance is not automatically lost. Read the release clause slowly, and if the package is large or the circumstances feel off, pay for one hour of a lawyer's time before you sign, not after.

Say you are a contract worker or an outsourced worker placed at the site. Your employer is the contractor or supplier, not the plant owner, so your severance and notice come from that employer and your EIS contributions sit under that employer. If the contractor simply stops giving you work rather than terminating you, look at the lay-off provisions in the 1980 Regulations rather than assuming you have simply been forgotten.

And if you are not being retrenched at all but your employer is clearly shrinking, the practical implication is boring and useful: check now that your EPF and PERKESO contributions are actually being paid each month, keep a personal copy of your contract and last twelve payslips, and know your start date. Every calculation above depends on documents that are much harder to get after your access card stops working.

What this incident teaches us

The biggest misunderstanding is that the Labour Department "approves" retrenchments. It does not. Borang PK is a notification, backed by a section 63 offence if the employer skips it. A company that files the form correctly has not thereby proven the retrenchment was fair, and a company that forgot to file has not thereby made your dismissal unlawful. They are separate questions decided in separate places.

The second misunderstanding is that severance is one number. It is at least four: termination benefits under the 1980 Regulations (if section 60J applies to you), notice or pay in lieu, payment for accrued annual leave, and any outstanding salary or contractual entitlement. People negotiating a "final figure" often quietly give up two of the four because nobody itemised them.

The third is deadline blindness. Two clocks start on your last day and they run at different speeds: 60 days to apply for EIS with PERKESO, and 60 days to file a section 20 representation if you want to challenge the dismissal itself. Seven days is how long the employer has to pay statutory termination benefits. None of these clocks pause because you are still upset, still job hunting, or still waiting for the company to reply to your email.

Finally, be honest about the limits of law here. Even a textbook-perfect retrenchment leaves people out of work. The Industrial Court does not generally second-guess a genuine commercial decision to close a plant; it looks at whether the redundancy was real and whether the selection and process were fair. The realistic win from knowing your rights is not stopping the closure. It is being paid correctly, on time, and not signing away something you did not have to.

The verdict

A plant closing is not, by itself, a legal wrong. What the law fixes is the floor: a severance formula for employees covered by section 60J, statutory notice, payment within seven days, a notification the employer owes the Labour Department, and a separate insurance claim you must lodge yourself within 60 days. Whether any of it applies to you depends on your wages, your service length and your contract — so the useful move is to check those three facts today rather than argue about fairness later.

What can I do if this happens to me?

• Get everything in writing on day one: the termination or redundancy letter with your last working day, your employment contract, the employee handbook, any collective agreement, and your last twelve payslips. Save personal copies before your company email and access are cut off.
• Write down your exact start date and total years of continuous service, then check whether section 60J applies to you at all — as a rule of thumb it does not if your monthly wages exceed RM4,000 and you are not in a First Schedule category treated differently.
• Itemise the package rather than accepting a single figure: termination benefits, notice or pay in lieu, accrued annual leave, outstanding salary, and anything contractual such as bonus or commission. Ask in writing which component each ringgit represents.
• Apply to PERKESO for Employment Insurance System benefits within 60 days of your date of loss of employment, through the official EIS portal at eis.perkeso.gov.my, and register with MYFutureJobs. Do not wait until your notice period ends to check whether you qualify.
• Ask your employer, politely and in writing, to confirm that the retrenchment notification (Borang PK) has been submitted to the Labour Department. For independent help on unpaid statutory entitlements, contact your nearest Jabatan Tenaga Kerja office through jtksm.mohr.gov.my.
• If you genuinely believe the redundancy was a pretext, note that a section 20 Industrial Relations Act 1967 representation must be filed with the Industrial Relations Department within 60 days of dismissal. Get advice quickly, because that window is short and unforgiving.
• Before signing any full-and-final release or VSS acceptance, read the clause that waives future claims. If the sum is significant or the circumstances feel unfair, take an hour of paid legal advice first — after signing, your options usually narrow sharply.