Employees’ right to earn their livelihood is guaranteed under Article 5 of the Federal Constitution. The term “livelihood” refers to how one obtains their source of income to buy the things they need and secure life’s necessities. A person’s job is the main source of their livelihood.

One of the ways to deprive someone of this right to livelihood would be by unjustly and unfairly removing or terminating them from their employment. This situation is referred to as unfair dismissal. In 2019, the Industrial Court of Malaysia received 10,000 cases of unfair dismissal brought by employees against their employer.

Industrial Relations Act 1967

The Industrial Relations Act 1967 (IRA 1967) governs the rights and obligations of employers and employees in cases of dismissal. It provides a legal framework for determining whether a dismissal is fair or unfair. Violations of this Act, including unfair dismissal, may result in legal consequences for the employer, including compensatory damages or reinstatement of the employee.

IRA 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.

When is a dismissal unfair?

In Malaysia, you may have been unfairly dismissed if you have been fired for no just cause or excuse (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.  Employers must have a valid reason for dismissing the employee, such as poor performance or misconduct. The dismissal may be considered unfair if the employer cannot provide a valid reason.

If an employee is dismissed for exercising their legal rights, such as taking maternity leave or joining a trade union, this would also be considered an unfair dismissal. Employers cannot terminate an employee’s employment for exercising their legal right.

Discrimination is another situation that can be considered unfair dismissal. If an employer terminates an employee’s employment based on their race, religion, gender or other protected characteristics, this would be considered discriminatory and, therefore, unfair.

Differences between direct and constructive dismissal

Note that unfair dismissal is different from constructive dismissal. You may also hear indirect dismissals described as ‘constructive dismissals.

  • Indirect or constructive dismissal is a form of unfair dismissal, and it happens when an employer deliberately makes life at work hard for their employee or treats them so badly that the member of staff ultimately resigns. They may also pressure employees to resign in other ways so they feel that resignation is their only option.

For example, an employer might constructively or indirectly dismiss a member of staff by:

  1. Demoting them or preventing them in other ways from carrying out their regular duties.
  2. Excluding them from meetings where they need to attend to make decisions
  3. Discriminating employees for their race, age or religious beliefs, thus making them feel isolated and lose sense of confidence at work
  • Direct dismissal is a type of termination where an employer terminates an employee’s contract without notice or payment in lieu of notice. This type of dismissal is usually reserved for cases of serious misconduct, such as theft, fraud, disclosing confidential information to a third party or violence in the workplace. In such cases, the employer may be justified in terminating the employee’s contract without notice or payment in lieu of notice.

Direct dismissal is a serious matter and should not be taken lightly by employers. Employers need to follow proper procedures and ensure that they have sufficient evidence before terminating an employee’s contract. If an employee believes they have been unfairly dismissed through direct dismissal, they may have grounds for legal action.

**Direct dismissal may be a fair or unfair dismissal, whereas constructive dismissal is a form of unfair dismissal. This article focuses on unfair dismissal in Malaysia. 

How to Make a Claim for Unfair Dismissal

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.”

To claim unfair dismissal in Malaysia, the following steps must be followed:

  1. GATHER EVIDENCE– the first step an employee should take if they believe they have been unfairly dismissed is to gather as much evidence as possible to support their case. This could include emails, letters, witness statements, and other relevant documentation.
  2. REACH OUT to the Industrial Relations Department (IRD), specifically the Director-General (DG), to file a complaint. Complaints of unfair dismissal should include details of the dismissal, the reasons given by the employer and any evidence to support the claim of unfair dismissal.
  3. Take part in MEDIATION– After the complaint has been filed, the IRD will schedule a mediation session between the employee and the employer to try and resolve the matter without going to court; an officer from IRD will play the role of a mediator and try to reconcile the employee and the employer to achieve amicable settlements.

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. Parties must make a written application to the DG to have this representation, usually in the form of a family member or a representative from a trade union. If parties can settle their differences, that will end the matter without the need to go to court.

Time limits to file a complaint to IRD

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

Hearing at the Industrial Court

If parties fail to agree at the conciliation meeting, the matter is referred to the Industrial Court for adjudication. The Industrial Court will hear evidence from both parties and decide based on the case’s merits.  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 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 and a warrant of authority allowing them to represent the party in court.

The judge will give directions on what papers need to be filed. The document that the claimant needs to file is a statement of the case. The employer (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, the company presents its case because the burden of proof lies with the employer to prove that the dismissal was based on cause or excuse. (Note, however, that in constructive dismissal cases, the employee has the burden of proof).

Following the company’s case, the claimant 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 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 the dismissal was made without cause or excuse, they will rule it was unfair or wrongful and hand down their decision as an award.

Right to appeal against the decision of the Industrial Court

Under section 33C of the Act, a party unhappy with their award can appeal it within 14 days to the High Court. The High Court will review the case and make a final decision. It is important to note that the decision of the High Court is final and cannot be appealed.

Unfair Dismissal Remedies

There are several remedies that the court may order:

  1. Reinstating the employee to their role – however, the court rarely orders this because employment is personal, and relations are likely to have been damaged by this point.
  2. 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 amount of compensation will also depend on various factors, such as the length of service, the employee’s last drawn salary and the circumstances of the dismissal.
  3. The employee can be awarded back wages they would have earned without being 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 in this amount too.
  4. Other civil remedies include an order for the employer to cease and desist from engaging in unfair labour practices or an order to provide the employee with a letter of reference.

Do not let unfair dismissal go unchallenged

It is important to note that to be eligible for remedies, the employee must file a complaint with the IRD within sixty days of dismissal. Obtain legal advice as soon as possible 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.

This content was written and reviewed by a lawyer but it does not constitute legal advice. We always recommend engaging a lawyer before taking any legal action.