A. Introduction
An employee is suspended when he is temporarily relieved of his responsibilities and is not required to attend to his work during that period.
Suspension, when executed properly, is a disciplinary action that an employer can legally take against his employee either to facilitate an effective internal investigation for misconduct or as a form of punishment after the investigation if the misconduct is established.
However, as with all employer prerogatives, the suspension must be utilized reasonably and fairly, failing which there may be severe consequences to the employer including a suit in the Industrial Court.
This article discusses the basics of suspending an employee.
B. Right to Suspend Under the Employment Act
Previously, employers have an implied right to suspend an employee, even if the employment contract with the employee does not expressly provide such power.
In the case of BSN Commercial Bank & Anor v. Arumugam Ramasamy [2006] 4 ILR 2569, the Claimant claimed that the act of his employer, i.e. the bank in suspending him amounted to a fundamental breach of his contract of employment. However, the Court was of the view that the employer/bank had an implied power to suspend its employee as long as the suspension is with pay and there is cause or basis for such suspension.
However, pursuant to the recent amendment to the Employment Act vide the Employment (Amendment) Act 2022 and the Employment (Amendment Of First Schedule) Order 2022, things changed as now all employees are employees as defined under the Employment Act 1955, and thus the provisions of the Employment Act are now applicable (with exception to certain provisions being not applicable to employees with wages above RM4000.00). This therefore includes the provision on suspension which is Section 14 of the Employment Act 1955 that provides as follows:
(1) An employer may, on the grounds of misconduct inconsistent with the fulfilment of the express or implied conditions of his service, after due inquiry-
(a) dismiss without notice the employee;
(b) downgrade the employee; or
(c) impose any other lesser punishment as he deems just and fit, and where a punishment of suspension without wages is imposed, it shall not exceed a period of two weeks.
(2) For the purposes of an inquiry under subsection (1), the employer may suspend the employee from work for a period not exceeding two weeks but shall pay him not less than half his wages for such period.
Provided that if the inquiry does not disclose any misconduct on the part of the employee the employer shall forthwith restore to the employee the full amount of wages so withheld.
…
Thus, it is now beyond clear that an employer may suspend an employee pending investigation into any misconduct of an employee, for a period not exceeding two weeks with no less than half pay.
C. But How About Suspension with Full Pay Beyond 2 Weeks?
Now because of the amendment to the act, we now know that an employer cannot suspend an employee without pay. We also know that an employer can only suspend an employee for up to 2 weeks and must pay an employee at least half his pay.
The question now is, can an employer suspend an employee beyond 2 weeks but with full pay?
Now there are no case laws on this issue after the amendment, but guidance may be found in old case laws.
In the case of Thong Chin Yoong v Rekapacific Bhd (formerly known as Berjaya Industrial Bhd) & Another [2005] ILJU 105, the Court held that although there was no suspension provision in the contract of employment, as long as the employee was paid his salary during the suspension, there was no breach of contract by the employer.
The Court cited the following paragraph in O P Malhotra’s The Law of Industrial Disputes, Volume 2, Sixth Edition, with approval:
Though an order of suspension affects the employee injuriously, he continues to be in the service of the employer. In other words, suspension does not dissolve the vinculam juris of the employment relationship. During the period of suspension, though the parties are absolved from some of their obligations, a connection however tenuous, continues between the master and the servant. The servant, therefore, cannot seek employment anywhere, though he does not perform his normal duties for his master. Likewise, the master is obliged to give a subsistence allowance to the servant, though he may not be obliged to pay him the full wages which are to be paid for the specific work done by the servant.
Ordinarily, therefore, the absence of such power means that the master will have no power to suspend a workman and if he does so, in the sense that he forbids the employee from working, he will have to pay wages during the so-called period of suspension. Where, however, there is power to suspend either in the contract of employment, or in the statute governing the service of the rules framed thereunder, the suspension has the effect of temporarily suspending the relation of master and servant with the consequence that the servant is not bound to render service and the master is not bound to pay.
The above excerpt in fact went further to suggest that if an employment contract specifically provides for an employer to suspend an employee without pay, the employer can in fact do so.
However, my view is that since the amendment to the Employment Act mentioned above, that is no longer applicable to employees that fall within the ambit of the Employment Act.
In the case of Normalina Binti Mansor v Msu Holdings Sdn. Bhd. [2017] ILJU 122, the Court took into consideration that the Claimant’s suspension was with full pay, hence, the suspension albeit beyond 2 weeks, did not amount to a breach of the employment contract.
D. Can You Suspend with Pay but Indefinitely or Without Reason?
In MBf Finance Bhd v Abd Aziz bin Hashim [1995] 2 ILR 753, the Industrial Court held that there was an implied term in the contract of employment for an employer to suspend an employee on full pay pending investigations. The court cautioned that the power to suspend was open to abuse. An indefinite suspension could destroy the relationship of confidence and trust between employer and employee.
In fact, in the case of Thong Chin Yoong mentioned above, the Court held that the employee was suspended indefinitely, and the Court found that the employer did not actually proceed to investigate the allegations of misconduct, together with the lack of basis for such investigation in the first place, amounted to a fundamental breach of the employment contract, and the employee was constructively dismissed. The Court held that:
The court held that there was a breach of the implied term of mutual trust and confidence between employer and employee which went to the root of the contract of employment. The claimant has proved that he was constructively dismissed by the first company.
…
The indefinite suspension without formal charges was not sufficient by itself to amount to a breach of the implied term of mutual trust and confidence. That together with the lack of basis for suspension and the failure to investigate constituted a breach of the implied term of mutual trust and confidence.
In Zakaria bin Ahmad v Airasia Berhad [2015] 1 ILJ 835, the claimant was on continuous suspension for about seven months. Being placed on suspension for an indefinite and lengthy period was calculated to drive the claimant from his employment and amounted to a fundamental breach, which entitled him to consider himself constructively dismissed.
E. ADVICE TO EMPLOYERS
E1. Have a Legitimate Reason For Suspension
Employers must have a legitimate reason to suspend the employee, even if he continues to receive pay during the suspension.
Employers should be prepared to demonstrate to the Court the reason for the suspension, and that such suspension was necessary, otherwise the Court may find the suspension to be unwarranted and baseless.
E2. Reasonable Duration of Suspension
An employer must act fairly and reasonably based on what is necessary in the circumstances, taking into account the number of allegations that the employer needs to investigate and the complexity of the issues.
The case of EON Bank Berhad v Lee Seng Onn [2008] 3 ILR 170 drives home the point that being placed on suspension for a lengthy period may be deemed by the Court as merely a calculated tactic to drive an employee out of his employment. The Court held as follows:
In considering whether this suspension of 91 days was reasonable or whether it was calculated to drive the claimant from his employment, the court has carefully considered the arguments of both parties. That there was a need to investigate the allegations cannot be denied. Similarly the need to suspend the claimant during investigations also cannot be denied. However, just as the high ranking position of the claimant in the company necessitated suspension, so also does that high ranking position impose a requirement on the company to conduct investigations with all reasonable speed and without undue delay. The claimant should either have been exonerated over the allegations or else he should be brought to face specific charges for which he would at least be able to plead his case. The court finds that the suspension of three months, albeit with full pay, to be an intolerable situation for a person of the claimant’s rank and position. The court finds that this is especially so in light of the fact that the claimant’s various queries reflecting his concerns regarding his position, especially after the promotion of Lee Chia Wei, received no or no prompt attention.
Looking at the totality of all the evidence adduced in this issue, the court finds that the suspension of the claimant without any charges being framed against him for a period of 91 days to be inordinately and unacceptably long. The court agrees that the lengthy and indefinite suspension of the claimant can be seen to be calculated to drive him from his employment. A person of the rank and position of the claimant cannot be expected to endure a suspension of that length of time without specific charges being leveled against him.
E3. Communicate the Suspension Clearly to the Employee
By communicating, it means firstly, having such power clearly stipulated in the employment contract with the employee or in the company’s employee handbook, and secondly, properly informing an employee when he is being suspended, for how long and for what reason.
Both above would ensure that all parties are fully aware of the purpose, duration, and ambit of the suspension and what can be expected from it, thereby reducing misunderstandings or disputes.
In the case of Siti Sarinah bt Sibun v Azizah bt Kamaruddin & Anor [2009] 5 MLJ 824, the bank stipulated clearly in its employment handbook that it may suspend an officer before and/or after an inquiry with full pay or half pay not exceeding 14 days and with full pay if further suspension is required. The Court highlighted that in rendering the show cause letter, the bank had acted correctly in accordance with its established procedures and had made clear the purpose of the suspension. Therefore, the employee’s claim was without merit.
On the other hand, in the case of Lim Kim Leng v Fujitsu (Malaysia) Sdn. Bhd. [2019] 2 LNS 1786, the Court found that Claimant’s suspension with full pay by the Company did not amount to a fundamental breach and the Claimant cannot claim that he was being suspended without reason when he had duly received the suspension letter as well as the Notice to Show Cause which states the reason for suspension and the subsequent acts of misconduct that were discovered during the company’s investigations. The Claimant’s claim of constructive dismissal was rejected by the Court.
F. Conclusion
In conclusion, a suspension, when executed properly, is a legitimate and effective power that an employer can utilise.
On the other hand, a suspension, executed poorly, for example without proper reason, for an indefinite period, and/or without pay, will however lead to claims of constructive dismissal, and further monetary and reputational loss.
Thus, employers are strongly advised to seek legal advice prior to executing the same to limit exposure and litigation risk.
Should you require further advice on this issue, feel free to contact me.
Written with the assistance of my capable former interns, Carine and Evien.