Unfair Dismissal

Malaysian courts have held that an employee’s right to livelihood is guaranteed in the federal constitution. This protection does not mean that an employer cannot dismiss an employee, but it does imply that an employer cannot dismiss an employee without reasonable justification. If an employer wants to dismiss an employee, it must be done fairly and be reasonably justified.

Malaysian employment law is clear that employers must have “just cause and excuse” to terminate an employee’s employment.

Although the law seems clear when an employee may be dismissed, the Malaysian Industrial Court still deals with many unfair dismissal cases every year.

What does the law say about dismissal in Malaysia?

The Industrial Relations Act came into force in 1967. The purpose of the Act is to govern the relationship between employers and workers and provide mechanisms to resolve employment disputes, and remedies that are not available in common law or the Employment Act 1955.

Section 20(1) of the Malaysian Industrial Relations Act reads as follows:

“Where a workman, irrespective of whether he is a member of a trade union of workmen or otherwise, considers that he has been dismissed without just cause or excuse by his employer, he may make representations in writing to the Director-General to be reinstated in his former employment; the representations may be filed at the office of the Director-General nearest to the place of employment from which the workman was dismissed.”

Several amendments to the Act came into effect in January 2021. We will discuss these amendments where relevant below.

What constitutes unfair dismissal in Malaysia?

In simple terms, according to section 20(1), if you were dismissed without just cause or excuse, your dismissal is unfair.

The Act does not define “without just cause or excuse”. The circumstances of each case will determine if the dismissal was without just cause or excuse.

Section 20(1) applies to direct and indirect dismissals. Indirect dismissals are also called constructive dismissals.

Constructive dismissals refer to situations where the employer intentionally makes it very difficult for the employee or mistreats the employee and the employee feels forced to resign. It also includes situations where the employee feels that they have no choice but to resign because of duress or pressure from the employer.

Examples of constructive dismissal include situations where the employer demotes the employee or places the employee in a position where they cannot perform their regular duties. The employee is discriminated against based on their age, race or religion. A manager that is repeatedly excluded from meetings where they make managerial decisions might, for example, feel that they have no choice but to resign since they cannot perform their job. So, although there is no direct termination by the employer, the employer’s conduct, decisions, or policies make it impossible for the employee to remain in the employment.

In cases of direct dismissal, it could be easy to deduce that the dismissal was without just cause or excuse if, for example, an employee is dismissed shortly after informing the employer that she is pregnant, or shortly after refusing to work overtime, or after asking for a salary increase.

The Industrial Court looks at each case’s substantial merits without being overly concerned about technicalities when deciding if the dismissal was with just cause or excuse. It will also take procedural fairness into account when making a decision.

What can you do if you feel that you were unfairly dismissed?

(1) Approach the Department of Industrial Relations

If employees feel unfairly dismissed, they may make representations to the Director-General of Industrial Relations.

(2) Attend a conciliation meeting

Upon receipt of the representation, the Industrial Relations Department will arrange a conciliation meeting between the employee and the employer. An officer from the department will act as a mediator, in the hope that the matter can be resolved without going to court.

Parties are not allowed legal representation at these conciliation meetings.

However, the amendments did create an opportunity for both the employer and the employee to appoint any other person, except an advocate or solicitor to represent them at conciliation meetings. The parties need to apply to the Director-General for such representation, and the authorisation must be in writing. Parties may then be represented by a friend or family member of their choice.

If the parties reach a settlement at the meeting, the matter will end there.

(3) Referral to the Industrial Court

If the parties cannot reach a settlement, the matter will be referred to the Industrial Court.

In the past, the matter would first be referred to the Minister of Human Resources who would decide if the matter should be referred to the Industrial Court. Since January 2021, the Director-General will refer the matter straight to the Industrial Court if the DG is satisfied that there is no likelihood of a conciliation settlement. Referral to the Minister is no longer required. It is hoped that this amendment will shorten the time it takes to finalise unfair dismissal cases.

Is there a time limit in which you must make a representation?

Yes, section 20(1A) of the Industrial Relations Act stipulates that representations must be filed with the Director-General within 60 days of the dismissal. In the case of dismissal with notice, the period is extended based on the notice period.

What happens in the Industrial Court?

Once the matter is referred to the Industrial Court, the process is similar to a civil trial.

(1) Pre-hearing

The Industrial Court will issue a Notice of Mention to the employer and the employee to notify them that the matter is now on the Industrial Court role. The employee is now called the claimant.

The parties may appoint legal representation to represent them and file an application for permission to be represented by a legal practitioner and a warrant of authority authorising the specific representative to present them in court.

The judge will issue directions on what papers each party should file for the case. The claimant should file a statement of case, and the employer (now called the company) should file statements in reply. The claimant also has the opportunity to respond to the company’s reply.

Once both parties have filed all their papers and witness statements, the Industrial Court will set a hearing date.

(2) The Hearing

At the hearing, both parties can call their witnesses to support their case. The company will present its case first since the burden of proof is on the employer to prove that the dismissal was with just cause or excuse. In constructive dismissal cases, however, the burden of proof is on the employee.

Once the company’s case is closed, the claimant will present their case.

At the end of the hearing, the court will usually ask the parties to file written submissions.

If a reason for the dismissal were given, the court would evaluate, based on all the evidence and submissions, whether the evidence supports the reason. If no grounds were given, the court would look at all the circumstances to decide if the dismissal was fair and just.

(3) The Award

If the court finds that the termination was without just cause or excuse, the dismissal will be held as unfair or wrongful. The court’s decision is handed down as an award.

What are the remedies for unfair dismissal?

The employee can ask the court to order reinstatement to his former position in the company. In practice, due to the personal nature of employment, reinstatement is rarely ordered.

If reinstatement is not an appropriate remedy, the court can order compensation instead of reinstatement. Typically, compensation is calculated at one month’s salary for every year of employment.

In addition to reinstatement or compensation, the employee can ask for back wages that the employee would have earned if not dismissed. The Act limits back wages to a maximum of 24 months.

The court may also include interest.

Other than the remedies available under the Industrial Relations Act, the employee may also file a civil lawsuit against the former employer.

What can you do if you are not happy with the outcome?

Since January 2021, the new section 33C allows any party who is not satisfied with the outcome of the case to appeal to the High Court. A party has 14 days in which to file an appeal against the award.

Do you need legal advice?

Navigating unfair dismissal proceedings can be very stressful, and employees often face a team of highly skilled and experienced lawyers representing the company. A lawyer with experience in unfair dismissal cases will not be intimidated and will guide you through the process. An experienced lawyer will help you protect your rights and obtain the remedy you are entitled to.

If you are an employer facing unfair dismissal allegations, you should get legal advice as soon as possible. Unfair dismissal claims can have significant consequences for your business. If it is a senior member of your staff with many years of employment, compensation can amount to thousands, if not hundreds of thousands, of Malaysian Ringgit. An experienced lawyer will make sure that you and your business are protected against unfair allegations.