Like most jurisdictions that regulate the relationship between employer and employee, Malaysian employment law addresses wrongful dismissal. But unlike most of these other jurisdictions, the law in Malaysia places a huge premium on employee rights and provides many safeguards for these rights.
Under the law, employers are expected to be just and fair in their employment practices. When they let workers go, whether on grounds of misconduct or otherwise, the termination is expected to be justified.
Unfortunately, many employers do not keep this in mind in the course of their employment practices. Several employees are likewise ignorant of their rights under the law and how they may be enforced.
If you are an employer looking to terminate workers in your establishment, or if you are an employee that feels you were wrongfully terminated, you should contact a lawyer immediately. With the help of a skilled Malaysia labour law attorney, you can understand your rights and the options open to you.
In this article, we will discuss the nature of employment law in Malaysia and what safeguards it provides against wrongful dismissal. We will also address the remedies provided by law and how they may be exercised.
The nature of employment law in Malaysia
Employment in some other jurisdiction such as United States is based on the “At-Will Employment” principle. This principle basically means that an employer hires workers “at-will” and the worker may be relieved of their employment at any time and for any reason or no reason at all.
But in Malaysia, things are a bit different. Employment in Malaysia is regulated under the Employment Act 1955 and the Industrial Relations Act 1967. Under these laws, employers must be able to justify their termination of an employee. Hong Leong Equipment Sdn. Bhd. v Liew Fook Chuan and Anor  1 MLJ 481.
If the employer does not provide any reason for the termination or if the reason provided turns out to be unjust, the court may hold that unlawful dismissal has occurred.
What amounts to wrongful dismissal under Malaysian law?
Before we discuss what amounts to wrongful dismissal under Malaysia law, we will briefly explain the concept of wrongful dismissal.
An employee is wrongfully dismissed when their employment is terminated in a manner that is inconsistent with their rights under the contract of employment or under the law.
While the principle of “at-will” employment does not really apply in Malaysia, common law applies to certain other areas of employment. It provides for wrongful dismissal, just as the Employment Act and Industrial Relations Act also do. We will focus on the Industrial Relations Act (IRA) however.
Under the IRA, section 20 is to the effect that an employee that feels their dismissal was “without just cause or excuse” may challenge the dismissal. As such, the standard of wrongful dismissal under the IRA is dismissal that occurred without just cause or excuse.
It must be noted that these provisions also apply to constructive dismissal. An employee is constructively dismissed when, due to actions, decisions or polices imposed by the employer, they have no choice but to resign. In these circumstances, the “forced” resignation may amount to a breach of contract or law by the employer even though there was no direct termination.
What happens when wrongful dismissal is alleged?
The IRA allows an employee to lodge a “representation” to the Director General of Industrial Relations that their termination was unfair or wrongful. The representation must be made within 60 days from the date of termination if no notice was given. If notice was given, the representation can be made at any time during the period of notice or within 60 days from the date that the notice expires.
Once made, the representation is received and reviewed by the Industrial Relations Department (IRD). The IRD will then move to arrange a conciliation proceeding between the aggrieved employee and the employer. The aim of these sessions is to attempt to facilitate an amicable settlement between the parties.
The sessions will be attended by an officer from the IRD who will act as a conciliator between the parties. It is important to note that the officer cannot bind either of the parties in this procedure. The session is merely to try and help both parties resolve their differences and reach an amicable settlement. Neither party can be represented by legal counsel at the proceeding.
If a settlement is reached, the matter ends here. But if no settlement is reached, the matter will be referred to the Industrial Court for determination on the merits. Ordinarily, the referral should be made through the Minister for Human Resources, but moves are being made to remove this unnecessary bottleneck.
At the Industrial Court, the employer is expected to provide justification for the termination of the employee. Ireka Construction Berhad v Chantiravathan Subramaniam James  2 ILR 11 (Award No. 245 of 1995).
In essence, the burden is on the employer to show that the termination was with just cause and excuse. If no reason was initially given for the termination, the court will examine the circumstances to determine if the termination was justified. If reasons were given by the employer and the court finds that these reasons are not made out by the evidence, it will hold the dismissal to be wrongful.
Remedies for wrongful dismissal in Malaysia
The remedies available for an employee making a claim for wrongful dismissal at the Industrial Court include reinstatement or compensation in lieu of reinstatement, and back wages. Let us look at each of these briefly.
The Industrial Court may compel the employer to take the employee back into the position they were dismissed from. However, the court awards this remedy carefully since it is personal in nature. It should be noted that a prospective employee cannot claim reinstatement unless a contract of employment already exists between them and the employer. Hana International Sdu Bhd v Tan Thien Cheng (2002) 1 ILR 551.
If the court determines that reinstatement is inappropriate for the circumstances, it may award compensation in lieu. This simply means that the court may decide to award compensation instead of reinstatement. Compensation will however be awarded on the basis of 1 month’s salary for every year of service.
In addition to this, the court may see fit to award punitive compensation if the wrongful dismissal occurred in especially egregious circumstances. This would be the case if there is evidence of malice, bad faith or intention in the wrongful dismissal.
Lastly, back wages will often be awarded by the court once wrongful dismissal has been proved. However, a limit is imposed on the amount that can be awarded. The Schedule to the IRA provides that an award of back wages shall not exceed 24 months from the date of dismissal based on the last drawn salary of the worker.
The court may also take events that have occurred since dismissal into consideration. For instance, post-dismissal earnings and attempts to mitigate loss may be taken into account.
Also, the reliefs given will not include compensation for loss of future earnings and the court can also take any contributory misconduct of the worker into account.
Although the position in Malaysia employment law is definitely pro-employee, this does not mean that employees cannot be terminated. However, employers must abide by the law in conducting such termination whenever the need arises.
If you would like to better understand how these provisions of law apply to your specific circumstances, contact us at Alan Kang & Co today. Call us on +603-7972 7223 to speak to a qualified lawyer.