Unfair Dismissal in Malaysia

Any employer who wishes to dismiss an employee must do so with good reason, and in a fair manner. An employee’s right to earn their livelihood is enshrined in Malaysian law, and guaranteed in the federal constitution.

Without “just cause and excuse”, employment law in Malaysia makes it clear that an employee’s employment cannot be terminated.

Despite this, every year there are still cases which come before the Malaysian Industrial Court, brought by employees claiming unfair dismissal.

Legal provision for dismissal in Malaysia

The main piece of legislation which governs the relationship between employers and their staff is the Industrial Relations Act of 1967. It contains mechanisms designed to solve disputes over employment rights, and provides remedies that the common law does not, nor are they in the Employment Act 1955.

The Malaysian Industrial Relations Act states, in section 20(1):

“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.”

In January 2021, several sections of the Act were amended. We’ll look at these below.

When is a dismissal unfair?

In Malaysia, if you have been fired from your job for no good cause or excuse, then you may have been unfairly dismissed (section 20(1)).

There is no specific definition within the Act as to what ‘without just cause or excuse’ means, so each case will depend on its particular circumstances.

Note that the above section of the Act applies to both direct and indirect dismissals. You may also hear indirect dismissals described as ‘constructive dismissals’.

Indirect or constructive dismissals happen when an employer deliberately makes life hard for their employee, or treats them so badly that the member of staff ultimately resigns. They may also pressurise the employee into resigning in other ways, so they feel they have no choice in the matter.

For example, an employer might constructively dismiss a member of staff by demoting them or preventing them in other ways from carrying out their regular duties. Excluding someone from meetings where they need to attend to make decisions is an example of this. Sometimes, employees will be discriminated against based on their race, age or religious beliefs. No direct termination of the employee’s role has occurred, but the conduct or policies of the employer mean that the employee simply cannot remain in their role.

Direct dismissal is often easier to spot, and may include situations where a member of staff was dismissed soon after telling their employer that they are pregnant, or soon after refusing to work overtime, or following a request for a salary rise. In these cases, it may be easier to see that there was no just cause or excuse for the dismissal.

In each case, the Industrial Court will consider the basic facts regardless of technicalities and decide whether just cause or excuse for the dismissal was present. The Court will also look at procedural fairness and whether that was present, as they make their judgement.

Action an employee can take if they suspect unfair dismissal

  1. Contact the Department of Industrial Relations, specifically the Director-General (DG).
  2. Take part in a conciliation meeting: to try and resolve the matter without going to court, an officer from the department will play the role of a mediator and try to reconcile the employee and the employer.

No legal representation is allowed at these meetings, however both parties can appoint another person to represent them at the meeting, as long as that person isn’t an advocate or solicitor. To have this sort of representation, which is usually in the form of a family member or friend, parties must make a written application to the DG. If parties are able to settle their differences, then that will be the end of the matter.

  1. If parties fail to agree, the matter is referred to the Industrial Court. In the past, matters were only referred to the Industrial Court if the minister of Human Resources deemed it necessary, but since January 2021, the DG makes the referral straight to the Industrial Court if they’re satisfied that a settlement is unlikely or impossible. This change was designed to speed the process of solving unfair dismissal claims.

Time limits for making representations

Representations have to be filed with the DG within 60 days of the dismissal, under section 20(1A) of the Industrial Relations Act. In situations where an employee was dismissed with notice, the time limit is based on the notice period.

The process at the Industrial Court

The process followed for matters which end up at the Industrial Court is much like the procedure for a civil trial.

(1) Pre-hearing

To notify the employer and employee that their matter has now reached the Industrial Court, the court will issue a Notice of Mention to both parties. From this point on the employee is known as the claimant.

Parties are now allowed legal representation. To do this, their representatives must file an application for permission to represent, as well as a warrant of authority allowing them to represent the party in court.

As to what papers need to be filed, the judge will give directions. The document that the claimant needs to file is a statement of case. The employer (who is now called the company) must file statements in reply and if they wish, the claimant can also respond to the company’s reply.

Once the Industrial Court is satisfied that both parties have submitted the correct documents and statements, they will set the hearing date.

(2) The Hearing

Witnesses for both parties will be called to support their respective cases. First of all, the company presents its case, because the burden of proof lies with the employer to prove that the dismissal was based on just cause or excuse. (Note, however, that in constructive dismissal cases, the employee has the burden of proof).

Following the company’s case being presented, the claimant then presents their case.

The court normally asks both sides to file written submissions at the end of the hearing.

The court must evaluate all of the evidence and submissions they have heard, and the reason given for dismissal, if one was given. Where no reason was given, the court examines the circumstances of the dismissal to assess fairness.

(3) The Award

If the court believes that the dismissal was made without just cause or excuse, then they will rule it was unfair or wrongful, and hand down their decision as an award.

Right to appeal the award

Under section 33C of the Act, a party who is unhappy with their award can appeal it within 14 days to the High Court.

Unfair Dismissal Remedies

There are several remedies that the court can order:

  • Reinstating the employee to their role – however, the court rarely orders this, because employment is a vey personal matter and relations are likely to have been damaged by this point.
  • The court may order compensation to be paid to the employee – often this is calculated at the value of one month’s salary, for each year spent in that role.
  • The employee can be awarded back pay that they would have earned if they hadn’t been dismissed. This may be given in addition to compensation. However, there is a limit of 24 months on the amount of back pay that can be given. Interest may be included on this amount too.
  • Aside from remedies provided by the Industrial Relations Act, the employee might wish to file a civil lawsuit against their former employer.

Protect your rights with Legal Advice

An experienced lawyer can help guarantee that your rights are respected and you are given any remedy you’re entitled to. They can also help you deal with the stress and complexity such cases can cause, especially when you are faced with a team of highly skilled lawyers acting for your employer.

Obtain legal advice as soon as you are able to, if you are an employer facing a claim of unfair dismissal from an employee. These cases can have significant and long-lasting consequences for your business, and compensation may amount to thousands or even hundreds of thousands of Malaysian Ringgit. The best way to protect you and your business from wrongful allegations is to seek help from an experienced lawyer in this field.