What is Unfair Dismissal?

Unfair dismissal is when an employee is dismissed without any “just cause or excuse”, as per Section 20(1) of the Industrial Relations Act 1967.

What Amounts to “Just Cause or Excuse”?

A dismissal is considered as with just cause or excuse if the employer is able to prove that the dismissal was motivated by at least one of the following reasons. These reasons are not exhaustive but are the most commonly accepted grounds that justify dismissal.

1. Poor Work Performance

As seen in I.E. Project Sdn. Berhad v Tan Lee Seng [1987] 1 ILR 165, an employer can dismiss an employee if the employee’s work performance is deemed to be unsatisfactory. However, before an employer dismisses an employee based on poor performance, the employer should provide sufficient warnings, guidance, and opportunities for the employee to improve.       

2. Misconduct

Under Section 14(1)(a) of the Employment Act 1955, an employer has the right to dismiss the employee for misconduct without due notice. While the Act does not provide for the definition of “misconduct”, the Court in Syarikat Kenderaan Kelantan Sdn Bhd v Transport Workers Union [1988] 1 LNS 234 described “misconduct” as

“… conduct so seriously in breach of the accepted practice that by standards of fairness and justice the employer should not be bound to continue the employment”.

Examples of misconduct are insubordination, absenteeism, theft, sexual harassment, just to name a few.

3. Retrenchment

Retrenchment is the dismissal of an employee that has become redundant and no longer needed by the company. In the Court of Appeal case of William Jacks & Co (M) Sdn. Bhd. v S. Balasingam [1996] MLJU 641, Gopal Sri Ram JCA (as he then was) quoted S.K. Das J in Hariprasad v Divelkar AIR [1957] SC 121 that defined retrenchment as:

“the discharge of surplus labour or staff by the employer for any reason whatsoever otherwise than as a punishment inflicted by way of disciplinary action”.

The Court also held that Courts will not normally interfere with a Company’s decision to retrench its employee(s) provided that the redundancy is genuine and there is no unfair labour practice:

“Whether the retrenchment exercise in a particular case is bona fide or otherwise, is a question of fact and of degree depending for its resolution upon the peculiar facts and circumstances of each case. It is well-settled that an employer is entitled to organise his business in the manner he considers best. So long as that managerial power is exercised bona fide, the decision is immune from examination even by the Industrial Court. However, the Industrial Court is empowered, and indeed duty-bound, to investigate the facts and circumstances of a particular case to determine whether that exercise of power was in fact bona fide”.

Can an Employer Dismiss an Employee Without Just Cause or Excuse?

Unlike in other countries where an employee can be dismissed provided that the termination terms in the employment contract are complied with, for example as long as the termination notice period is given, in Malaysia dismissals cannot be made without just cause or excuse.

The Court in Hong Leong Equipment Sdn Bhd v Liew Fook Chuan and Another Appeal [1996] 1 MLJ 481 recognizes that employees have a right to security of tenure in their employment, and that such rights may not be forfeited unless for just cause and excuse. Gopal Sri Ram JCA (as he then was) held that:

“The legislature has willed that the relationship of employer and workman as resting on a mere consensual basis that is capable of termination by the employer at will with the meagre consequence of paying the hapless workman a paltry sum as damages should be altered in favour of the workman. It has accordingly provided for security of tenure and equated the right to be engaged in gainful employment to a proprietary right which may not be forfeited save, and except, for just cause or excuse.”

What Can I Do If I Have Been Unfairly Dismissed?

An employee who deems him/herself dismissed without just cause or excuse, may make a representation to the Director General of Industrial Relations under Section 20 (1) of the Industrial Relations Act 1967.

An employee must make the representation within 60 days from the date of his/her termination or at the end of his/her termination notice, whichever is later. On how to make a claim in the Industrial Court and the Court process, please read How to Make A Claim in The Industrial Court.

Burden of Proof

In a case of unfair dismissal, the employer bears the burden of proof to show that the termination of the employment relationship was with just cause or excuse.

As illustrated in the case of Ireka Construction Berhad v Chantiravathan A/L Subramaniam James [1995] 2 ILR 11, the Court held that;

“It is a basic principle of industrial jurisprudence that in a dismissal case the employer must produce convincing evidence that the workman committed the offence or offences the workman is alleged to have committed for which he has been dismissed. The burden of proof lies on the employer to prove that he has just cause and excuse for taking the decision to impose the disciplinary measure of dismissal upon the employee. The just cause must be, either a misconduct, negligence or poor performance based on the facts of the case”.

What Are the Remedies Available for Unfair Dismissal?

If the Court finds that the dismissal was indeed without just cause or excuse, the Court may:

1. Grant an order of reinstatement whereby the employee is reinstated to his/her previous employment position. However, this order is rarely granted as the Court often finds that it is no longer conducive for both the employer and the employee that the employee returns to the company since parties’ relationship may have broken down.
2. Thus, often Court orders compensation in lieu of reinstatement. The compensation often takes the form of backdated wages, meaning the wages that the employee could have earned had he not been dismissed wrongfully. However such backdated wages is only limited to a maximum of 24 months for permanent employees and 12 months for probationers.
3. In rare circumstances, the Court may also order punitive and/or aggravated damages.

If the employer refuses to honour the award, the employee may lodge a complaint of non-compliance to the Industrial Court, and there are mechanisms available to enforce the award in the Civil Court.

On the other hand, a party who is not satisfied with the outcome of the case, can appeal the decision to the High Court under Section 33C of the Industrial Relations Act 1967.

Can We Only File A Claim in The Industrial Court?

It is not mandatory that all employment disputes must be made and tried in the Industrial Court; employees can choose to file their lawsuits against their former employer in the civil courts as well. One example is the case of Gajanan Y Bhide v MVE Technologies Sdn Bhd (formerly known as Atrax Petroleum Resources Sdn Bhd) & Ors [2011] MLJU 911.

Conclusion

In conclusion, the Malaysian employment law provides huge protection to employees. The Industrial Relations Act 1967 has been described by the Courts as a social legislature, designed to help employees.

However, this does not mean that employees cannot be dismissed if employers have proper justification and valid reasons for the termination.

Employers and employees alike, are thus encouraged to seek legal advice immediately when faced with a situation of unfair dismissal. That will ensure that the dismissal is either conducted correctly, or that redress can be sought at the soonest opportunity.

If you require any further advice or representation related to unfair dismissal, feel free to Contact Me.

Authored with the assistance of my able interns Ong Kai Ling and Connie Yap.