Employee Dismissals In Malaysia – A Legal Guide For The Employer

Primary Data

The primary data was acquired through statutes and cases. The relevant statutes are Employment Act 1955 and Industrial Relations Act 1967. Numerous cases were cited, such as Edi Hidayat Zulkefli v Pelabuhan Tanjung Pelepas Sdn Bhd [2017] 2 ILR 326; Surinding Singh Kanda v. Government of Federation of Malaya [1962] MLJ 169; Skypak International (M) Sdn Bhd v. Foong Kah Tin [1987] 1 ILR 495;Yasmin Haron v Extol Corporation (M) Sdn Bhd [2017] 2 ILR 359 etc.

Secondary Data

The secondary data was derived from academic journal and reliable legal website. The academic journals referred are the International Journal of Business, Economics and Law, the legal Network Series, the Industrial Law Report and the Malayan Law Journal. The reliable legal website is the Malaysian lawyers.

Basic Procedures Prior to Dismissing an Employee

In Malaysia, Employment dismissals are governed by the Employment Act 1955 (“EA 1955”) and the Industrial Relations Act 1967(“IRA 1967”). To be on the right footing with the Industrial Court pertaining to a dismissal matter, the employer must demonstrate that they have complied with the basic procedures prior to dismissal. A failure to provide evidence on compliance with the basic procedures could render the dismissal to be unlawful even if there were valid grounds to dismiss (Ashgar & Farheen, 2009).

This act of issuing notice is mandatory as it is clearly stated in S 12 of the EA 1955. S 12(1) of the EA 1955 provides that, any one of the parties to a contract of service may serve the other with a notice of an intention to terminate the said contract at any material time. Although this provision refers to actual termination of the said contract, nevertheless, it lays the groundwork that a notice is mandatory if there is intention by any party to possibly do away with their employment contractual obligations (Dhillon, 2013).

In Edi Hidayat Zulkefli v Pelabuhan Tanjung Pelepas Sdn Bhd [2017] 2 ILR 326, no notice of Domestic Inquiry (“DI”) was served to the claimant and prior to the DI, the claimant had only been given an hour to prepare his defence. In fact, the employer’s witness testified in the Industrial Court that, the DI’s notice shall be served on the claimant at least seven days before the DI hearing. The Industrial Court held that, failure to serve a DI’s notice on the claimant is a violation to the doctrine of natural justice and it occasioned a blatant miscarriage of justice. Due to the failure of serving the DI’s notice, the claimant had lost a significant opportunity to prepare a proper defence to the allegations against him and the opportunity to get his witnesses to testify for him.

In relation to the importance of the rules of natural justice, the Industrial Court quoted the principles established by the Privy Council in Surinder Singh Kanda v. Government of Federation of Malaya [1962] MLJ 169, where there are two pillars in upholding the doctrine of natural justice. Firstly, the rule of ‘audi alteram partem’ meaning no one is to be condemned unheard and secondly, the rule against bias under the maxim of ‘nemo judex in causa sua’ meaning no one should be a judge in his own cause.

To highlight natural justice further, the Industrial Court also quoted the principles laid down in Skypak International (M) Sdn Bhd v. Foong Kah Tin [1987] 1 ILR 495, where firstly, a workman must be served with a reasonable notice of DI, which must inform him the allegation(s) that he will need to defend during the DI. Secondly, a workman must have a reasonable opportunity of being heard in his own defence in pursuant to the maxim of ‘audi alteram partem’, which means no one is to be condemned unheard and this includes inter alia, the opportunity to face and challenge his accusers, witnesses and whatever evidence that is against him. Thirdly, the DI must be conducted by an impartial panel, which is consistent to the maxim of ‘nemo judex in causa sua’.

Therefore, giving notice to the employees is definitely an important step as it not only prepares them to face possible disciplinary actions and gives them opportunity to prepare their defence but also prepares them to face the worst consequence: being dismissed the employer. In the notice to the employee, the notice shall notify the employee on the grounds of an alleged breach of the employment contract, either on the ground of poor performance or misconduct.

For poor performance cases, the basic procedure to be complied with is that a notice should be sent to the employee indicating that he had been performing poorly and as a result had breached the term(s) of the employment contract (Mitra, 2016). In addition, the employee should be given further training and counselling so that he could improve his job performance. Further, a time period to improve must also be given to the employee before an idea of dismissal comes into the employer’s mind (Mitra, 2016).

In Yasmin Haron v Extol Corporation (M) Sdn Bhd [2017] 2 ILR 359, the claimant was on probation as an Assistance Business Manager of the employer’s company. One of the claimant’s job descriptions was to achieve sales target set by the employer’s company and she had accepted it. The employer’s company extended her probationary period for a further 3 months as the claimant did not meet her sales target. The Claimant had accepted the said extension without any objection. However, at the end of the extended three months probationary period, the claimant failed to hit the sales target and as a result, she was dismissed. The claimant contended that her dismissal was without just cause and excuse because she was unaware of any sales target that she was required to achieve.

The Industrial Court was satisfied with the evidence, i.e. The employer gave 3 months further probation, for her to improve performance and change her work attitude, but she still failed to demonstrate her fitness to hold the position, as expected by the employer. During her extended probationary period, the employer had issued two notices or letters to the claimant i.e. a warning letter to the claimant regarding her failure to submit her daily sales activities to her superior and a show cause letter for being late to attend the company’s training sessions. Due to the evidence tendered, the Industrial Court held that the employer had complied with the basic procedure prior to the claimant’s dismissal and such dismissal was on a bona fide basis.

For misconduct cases, a due inquiry process which would include amongst others, a domestic inquiry (“DI”). This DI will need to be conducted by the employer before a dismissal is justified. The due inquiry process is specified in the S 14(1)(a) of the EA 1955. It states that an employer may on the grounds of misconduct where an action violates the express or implied conditions of the service, after due inquiry, dismiss the employee without notice. The so called due inquiry or a proper DI adopts the principle of natural justice (Geyzel, 2016).

In the case of Mohd Ibrahim Hassan v. Diamond Cutting (M) Sdn Bhd, Kota Bharu [1980] 1 ILR 194, the court decided that the requirement of a DI has acquired great significance in our industrial law, and has become a statutory requirement prior to the inflicting of punishment for misconduct as laid down in S 14 of EA 1955. The effect of this provision is that before an employer can dismiss an employee on the grounds of misconduct, the employer must hold a proper DI, otherwise, the doctrine of natural justice is not complied with.

In the case of Eastern Plantation Agency Sdn Bhd v Association of West Malaysian Plantation Executives [1985] 1 ILR 339, the court commented on the concept of natural justice namely the rule of a fair hearing and the rule against bias. The former demands a fair hearing. It is especially important for the employer to demonstrate that a fair hearing was conducted and such hearing was conducted by an independent committee or commission in the organisation before deciding to dismiss the particular employee. Neglecting such basic procedures could be a violation of the whole code of administrative or procedural rights. As the saying goes, ‘justice must not only be done but also clearly seen to be done’.

In Dreamland Corp. (M) Sdn. Bhd. v Choong Chin Sooi & Anor [1998] 1MLJ 111, the court observed that if a workman has been dismissed without just cause or excuse by his employer, not only the reasons for his dismissal but also the manner of the dismissal has to be taken into consideration. The court, in recognising the employee’s right to be heard before his dismissal, stipulated the rule that “the accused must be given ample chance not only to know the case against him but also to answer or defend it.” Therefore, it seems that DI is impliedly required before a dismissal is held valid.

Non-Compliance with the Basic Procedures Prior to Dismissal – ‘De Novo’ Cases

However, this supposedly implied requirement came to a muddle due to the decision of the Supreme Court’s (currently known as Federal Court) in Dreamland Corporation (M) Sdn Bhd v. Choong Chin Sooi & Industrial Court of Malaysia [1988] 1 CLJ 1, where it was held that, a defective DI or an omission to hold a DI will not influence or determine whether the employee was dismissed without just cause or excuse. Such a decision was then followed by the Federal Court’s decision in Wong Yuen Hock v. Syarikat Hong Leong Assurance Sdn Bhd & Another Appeal [1995] 3 CLJ 344 (Goh, 2016).

What this means in layman terms is that it is not detrimental on the part of the employer if a defective DI was conducted or not so long as the employer can prove that he had dismissed the claimant with ‘just cause and excuse’ in the de novo proceedings before the Industrial Court. Therefore, as it stands, it seems that the procedural requirement of having to show on the part of the employer that a DI had been conducted prior to the dismissal is not mandatory (Goh, 2016).

In Mohamad Rafie Mohd Razi v Hume Concrete Sdn Bhd [2017] 2 ILR 161, the Industrial Court contended that the so called DI conducted by the employer was unacceptable, incomplete and inaccurate due to the first page of the DI’s notes was half blank and none of the employer’s witnesses can provide explanation on this. The employer did not provide evidence as to who had recorded the handwritten minutes of the DI. Also, no explanation on the cancellations in some notes taken down in the DI. However, despite the fact that the employer had conducted a flawed DI, the Industrial Court followed the principles laid down in Dreamland and Wong Yuen Hock where it held that a defective DI or failure to conduct a DI is not a fatality but merely an irregularity that is curable by de novo proceedings before the Industrial Court.

Furthermore, in the recent case of Liew Wing Fai @ Lew Wing Fai v Dry Cut Sdn Bhd [2017] 1 ILR 582, the claimant was dismissed due to misconduct and prior to his dismissal, he was not issued with any warning or show cause letter and no DI was conducted against him. The claimant alleged that he was dismissed without just cause and excuse.

The Industrial Court, though agreed to the fact that no DI was conducted, quoted the principles derived from Dreamland, where Wan Suleiman SCJ (as he then was) held that, an omission of DI or a defective DI is not a fatality but only an irregularity, the employer is allowed to justify before the Industrial Court by adducing all relevant evidence. Unless the Industrial Court has found that the dismissal was without just cause or excuse, the Industrial Court has no jurisdiction to grant any relief in regards to the omission of DI or a defective DI. The Industrial Court was then proceeded to hear the case ‘de novo’.

The Three Main Types of Dismissals