Unfair dismissal in Malaysia is an issue that affects both employers and employees in Malaysia. This article explains what is an unfair dismissal, and the legal process to seek compensation.
What is Unfair Dismissal in Malaysia?
Unfair dismissal in Malaysia is when an employee has been terminated by an employer without a just cause or valid reason in Malaysia. The employer will have to pay compensation to the employee for unfair dimissal.
The main employment laws and regulations currently In force in Malaysia are Employment Act 1955 and Industrial Relations Act 1967 (‘IRA 1967’), which apply to all employees, including foreign employees.
Under the principles of termination of employment in Malaysia, a worker cannot be dismissed without a good reason. Otherwise, the employee has the right to seek compensation as a result of the wrongful dismissal. Whether a termination is with just cause or not depends on the situation.
Several employer actions often result in unfair dismissal claims:
Termination without proper documentation or valid reason.
Firing employees without following due disciplinary procedures.
Retrenchment disguised as performance issues.
Discrimination based on age, gender, or other personal factors.
Types of Dismissals in Malaysia
In our country, there are two types of dismissal, which are direct and indirect dismissal.
Direct Dismissal
A direct dismissal happens when employers terminate the employees directly by issuing a notice of termination or through verbal. The reasons for terminations depend on specific circumstances but usually include the following:
Misconduct: Examples include theft and leaking of a business’s confidential information. Employees should protect the employer’s business.
Retrenchment and redundancy: It happens when the requirement for the current job and labour has no longer existed.
Reaching retirement age.
Indirect dismissal
Indirect dismissal also known as ‘constructive dismissal’ in Malaysia happens when as a consequence of the employer’s actions, the employee is left with no choice but to tender resignations and leave employment. Some of the employer's actions are:
Non-payment of benefits such as salary and allowance.
Unauthorized salary reductions
A drastic change in job descriptions
Making an Unfair Dismissal Claim
When there is an unfair dismissal, that is termination without just cause, the employee can follow the below 6 steps to claim for unfair dismissal:
Step 1: Gather evidence
Before pursuing unfair dismissal claims in the Industrial Court, the employee can:
(a) Collect sufficient evidence: This includes a termination letter, employment contract, discussions/disputes with the employer through emails, or notice of any disciplinary action.
(b) Examine the clauses and conditions in the employment contract to see whether the employer follows any pre-set procedure and conditions before termination.
Step 2: Initiate a Claim
Under the IRA 1967, workmen also known as ‘employees’ have to file the claim/complaint with the Industrial Relations Department within 60 days from the date of dismissal. In that department, the employee has to fill out the necessary forms and provide documents. After submitting the claim, the workman is now known as ‘claimant’.
Pre-Hearing Procedures
During the pre-hearing procedures, the industrial relations department organizes a few conciliation meetings. These meetings present an opportunity to both the company and the employee for settlement of the matter and usually legal representation is not allowed here.
If the employer is a company (i.e Sdn.Bhd.), then they can be represented by a representative such as director of the company.
Also, the related officers will make a due inquiry into the dispute to ensure there is termination. If they cannot reach any settlement, the Industrial Relations Department will make a reference, that is transferring the dispute to the Industrial Court for hearing.
Conducting the Hearing
The procedure at the Industrial Court begins with the parties exchanging documents and witness testimony. The parties are allowed legal representation by counsel or trade unions.
The procedures here are less rigid than in civil courts as the courts acted according to the principle of equity and conscience. When the parties are ready for a hearing, the court will set a trial date for the parties to attend with any witnesses to give evidence.
The burden is on the employer to show that there is justification and merits in the decision to terminate the employee. On the other hand, side, the employee just has to rebut that the circumstances and actions do not warrant termination or there is no fairness or fair procedure followed in coming to the decision.
Decision and Award
After the hearing, then the Industrial Court has the power to make a determination on the disputes, that is to decide in favour of the employee or the employer. If the employee wins the case, some of the entitlement and relief the employee can get is:
(a) Reinstatement:
It means restoring the employee to the former employment/job where he is first fired from. This remedy is suitable when the employment relationship is still possible. However, it is rarely given as usually the relationship between the parties has broken down.
(b) Backwages, in lieu of reinstatement
When reinstatement is not practicable, then the Court can order other relief, including back wages to compensate for loss of earnings. It means the courts can order the employer to pay the employee full wages for up to 24 months (for confirmed employees) and 12 months (for probationers). However, deductions will be made for post-dismissal earnings (if any).
(c) Compensation in Lieu of Reinstatement
The court can also award monetary compensation as a form of damages. Generally, this compensation is set at one month’s last drawn salary for each completed year of service. Incomplete years don’t count towards this calculation.
However, the amount of compensatory damages is entirely subject to the discretion of the courts.
Appealing an Industrial Court Decision and Enforcement
If any party is dissatisfied with the decision of the Industrial Court, then they can file an appeal to the High Court within 14 days from the date the Industrial Court delivers the award.
Reasons for appeal differ from each situation and context. Some of the reasons for appeal include:
Procedural errors during the trial
Misinterpretation or misapplication of the law
Insufficient evidence supporting the decision
From established principles and past unfair dismissal cases, an appeal can be successful when the industrial court has misinterpreted the law or the evidence. On the other hand, the party that wins at the Industrial Court can enforce the order.
Best Practices for Employers
To prevent cases of wrongful dismissal claims, here are a few tips employers can use:
Proper procedureThe employer can implement disciplinary action such as issuing a show cause letter and conducting a domestic inquiry as part of the dismissal process.
Engage employment lawyer
An experienced lawyer will be able to give legal advice on the legal rights and actions and best practices to handle disputes and conflicts. Also, he can provide legal information and general knowledge on the action to take with its basis.
Voluntary separation scheme
A voluntary separation scheme in Malaysia (vss Malaysia) is a program where the employer invites the employee to resign voluntarily by giving the required notice period. In return, the employer pays a certain amount of money to the employee. This is a good alternative to prevent unlawful dismissal claim.
The best of all is to advocate for a good relationship and open communication between employer and employee although that is not possible in all situations.
Conclusion
Understanding unfair dismissal in Malaysia can be complex at first, but the above guide will help anyone facing the situation. If you need any legal advice, do contact us and our team will assist you.
Frequently Asked Questions
1. What is the unfair dismissal award in Malaysia?
For employees, an unfair dismissal can be reinstatement or instead of reinstatement, payment of back wages up to 24 months (for confirmed employees) and up to 12 months (for probationers). The courts can also award compensation.
2. How do you prove a dismissal was unfair?
Unfair dismissal is when an employee is dismissed in a harsh, unjust or unreasonable manner. This can include cases of wrongful termination, constructive dismissal, or termination without due process.
