Law on Dismissal in Malaysia

Overview

‘Dismissal’ is when an employer ends the worker’s employment.  

In another words, a worker is not considered dismissed if he/she been suspended for misconducts, or resigned by choice.

When this happens, the employee will be given a notice period as stated in the employment contract, or, for those under the purview of the Employment Act 1955 (‘EA 1955’), a statutory prescribed notice period (as found in paragraph 5 of this article here).

The employer, however, do not have to give the employee notice with period if the situation justifies an immediate dismissal, for example, for gross misconducts.

Valid Reasons for Dismissal

Basically, the employer must show that it has valid reasons for dismissal, or acted reasonably in the circumstances.

Such common reasons that justify dismissals include:

• misconducts,
• poor performance,
• redundancy or retrenchment,
• non-confirmation of probationers, or
• even termination due to retirement.

For whatever reason, the employer must always be acted consistently.

Therefore, it is advisable to put in place a dismissal procedure to ensure that all employees of the Company are treated fairly and consistently at all times.

Even for a part-time or fixed-term employee, they ought not be treated less favourably than a full-time or permanent employee.

Unfair and Constructive Dismissal

Although an employer is allowed to dismiss an employee, if they do it unfairly, the employee can challenge the dismissal.

A dismissal could be unfair if the employer does not have a good reason for dismissing an employee, or does not follow the company’s formal disciplinary or dismissal process.

Constructive dismissal is when an employee is forced to leave their job against their will because of the employer’s conduct. This is often a result of the employer’s breach of contract in one serious incident or a series of incidents that are serious when taken together, for example, a demotion for no reason.

To find out if your dismissal is unfair, you will need to seek legal advice to find out:-

(a)        what your ‘employment status’ is – your rights depend on this as often proven via an employment contract; and

(b)        whether the reason for dismissal is unfair under the law.

This must be done quickly as employee has only 60 days from the date of dismissal to start taking action on an unfair and constructive dismissal, firstly, at the Department of Industrial Relations in Malaysia.

What to do if you’re unfairly or constructively dismissed

Basically, where an employee considers that himself to be unfairly dismissed, he may make a representation in writing to the Director General of Industrial Relation (“DGIR”) of the Department of Industrial Relations in Malaysia to be reinstated in his former employment.

‘Reinstatement’ is a special remedy that forms the bulk of the claims in Industrial Court of Malaysia as provided under section 20(1) of the Industrial Relations Act 1967 (Act 177) (‘the IRA’).

The representations may be filed at the office of the DGIR (here) nearest to the place of employment from which the worker was dismissed.

It must be filed within 60 days from the date of the employee’s dismissal. However, if an employee is dismissed with notice, he may file a representation at any time during the period of such notice but not later than 60 days from the expiry thereof.

After receiving the representation, the DGIR will meet with both parties for conciliation. No lawyer or legal counsel is allowed to be present during the process. The DGIR will then notify the Minister of Human Resources to determine, if he thinks fit, to refer the representations to the industrial court for an award.

Industrial Court

The industrial court, being a tribunal established under the IRA, derives its jurisdiction under Section 30 of the IRA that once the representation is referred to the Industrial Court, the Industrial Court will act based on the equity, good conscience and the substantial merits of the case without regard to much technicalities and legal form.

If the employee win the case, the tribunal should give the following award:-

(a)        order the employee to be reinstated

Note: If the court found that reinstatement is inappropriate during the trial, the court may award compensation in lieu of reinstatement. The calculation of compensation is generally depend on the employee’s length of service and salary; 

(b)        order employers to pay back-wages

Note: calculation of back-wages begins from the day of dismissal until the last day of the court hearing, up to maximum 24 months, while for employees on probation, up to maximum of 12 months.

If either parties lose their case, they may make an application for judicial review in the High Court within 30 days from the date the award was made.

In the absence of an application for judicial review, an award is deemed final.

And, any monetary award can be enforced as a judgement of the High Court or the Session Court accordingly.

Conclusion:-

It must be emphasized the law as contained in the IRA aims to promote and maintain industrial harmony and balance the needs of employers to profits maximization and the needs of employees for the protection of livelihoods and tenure rights. Hence, it is prudent that parties involved shall make every effort to consult amongst each other to resolve any differences.

At the end of the day, healthy employer-employee relationships are vital for the success of any company or business. 

About the Author: 

This article was written by Chia Swee Yik, Partner of this Firm, who endeavors to provide practical advice on employment law.

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