The Code of Conduct for Industrial Harmony is a pact made to lay down principles and guidelines to employers and workers on the practice of industrial relations for achieving greater industrial harmony.
Prior to retrenchment exercise, the right approach would be for an employer to initiate a discussion with his employees’ representatives, trade union or the Ministry of Labour and Manpower to enable positive steps to be taken to avert or minimise reduction of workforce by the adoption of appropriate measures.
If it is inevitable, the employer should conduct the followings:
Provide a reasonable period of warning to the employee;
Introduce a Voluntary Separation Scheme or Retirement benefits;
Retire workers who are past their normal retirement age;
Assist and Corporate with the Ministry of Human Resources to enable the employees to find work outside the undertaking;
Spreading termination of employment over a longer period
Ensure that no such announcement is made before informing the employee or their representatives.
The Court of Appeal in the case of Equant Integration Services Sdn Bhd (In Liquidation) V. Wong Wai Hun  1 LNS 1296 held that the Code of Conduct for the Industrial Harmony is a mere guideline and it cannot be enforced as if it is a binding statute on the appellant. The failure to consult and give early warning as required by the Code cannot vitiate the fact that there was a genuine redundancy in the appellant company and failure to comply with the Code per se cannot be fatal in a proper retrenchment exercise. Whether or not a particular retrenchment exercise is genuine or otherwise would be based on the facts.
Be it as it may, an employer should still as a precautionary step where practicable comply with the Code as it is at the end of the day guidelines to ensure industrial harmony and the employer would have an upper hand to defend an unfair dismissal proceeding.