What is Unfair Dismissal in Malaysia?
In Malaysia, an unfair dismissal occurs when an employee is terminated without "just cause or excuse." This fundamental principle is enshrined in Section 20(1) of the Industrial Relations Act 1967 (IRA 1967). While the Act does not explicitly define "just cause or excuse," Industrial Court rulings have established that a dismissal must be based on a valid and substantial reason, and the employer must follow a fair procedure.
Common valid reasons for dismissal include:
- Misconduct: Serious breaches of company rules or employee duties (e.g., theft, insubordination, fighting in the office, continuous tardiness). For misconduct, employers are typically expected to conduct a "due inquiry" or "domestic inquiry" to allow the employee to be heard.
- Poor Performance: If an employee consistently fails to meet performance expectations, provided they have been warned, given sufficient opportunity to improve, and still fail to do so.
- Redundancy/Retrenchment: When the employer's business needs necessitate a reduction in workforce, provided fair selection criteria are applied and proper procedures (like notice to the Labour Department) are followed.
- Breach of Contract: Violation of key terms in the employment contract.
A dismissal may be considered unfair if it lacks a valid reason, is discriminatory (e.g., based on race, gender, age, disability, or union activities), or is carried out without due process (e.g., no proper notice or opportunity to defend oneself).
Direct vs. Constructive Dismissal
Unfair dismissal can manifest in two primary forms:
- Direct Dismissal: This is a formal termination where the employer explicitly ends the employment relationship. If this occurs without a valid reason or proper procedure, it can be challenged as unfair dismissal.
- Constructive Dismissal: This occurs when an employee resigns because the employer's actions or omissions have made the working conditions so intolerable that the employee feels forced to leave. The courts apply a "contract test," meaning the employer's conduct must amount to a fundamental breach that goes to the root of the employment contract, or demonstrate an intention to no longer be bound by it.
- Examples of constructive dismissal: Unilateral reduction in salary or benefits, unreasonable changes to job scope or duties (e.g., demotion, removal of substantial responsibilities), hostile working conditions (e.g., sexual harassment, bullying), or non-payment of wages.
- Employee's responsibility: The employee must not unduly delay in resigning after the breach, as this could be seen as waiving the breach.
Your Legal Options: The Process of Challenging Unfair Dismissal
If you believe you have been unfairly dismissed, you have legal recourse under the IRA 1967. Here's a step-by-step guide to the process:
- Gather Evidence: Before initiating a claim, collect all relevant documentation. This includes your employment contract, payslips, performance reviews, warning letters, termination letter, emails, witness statements, and any other evidence supporting your claim of unfair dismissal or the employer's breach of contract.
- File a Complaint with the Industrial Relations Department (IRD): You must file a written representation for reinstatement to your former employment with the Director General of Industrial Relations (DGIR) at the nearest Industrial Relations Department.
- Time Limit: This is crucial. You must file your complaint within 60 days from the date of your dismissal (or resignation date for constructive dismissal). Failure to do so may result in the court losing jurisdiction to hear your case.
- Conciliation Meeting: The IRD will arrange an informal mediation or conciliation meeting between you and your employer. The aim is to reach an amicable settlement without proceeding to court. Legal representation is generally not permitted at this stage. If a settlement is reached, the matter concludes here.
- Referral to the Industrial Court: If conciliation fails and no amicable settlement is reached, the DGIR will refer your case to the Industrial Court for adjudication.
- Industrial Court Hearing: The Industrial Court hearing is less rigid than civil court procedures, operating on principles of equity and good conscience.
- Legal Representation: Both parties are allowed legal representation by counsel or trade unions.
- Burden of Proof: In cases of direct dismissal, the burden of proof lies with the employer to demonstrate that the dismissal was with just cause or excuse and that proper procedures were followed. In constructive dismissal cases, the employee first bears the burden of proving the fundamental breach by the employer, after which the burden shifts to the employer to justify the dismissal.
- Evidence and Submissions: Both sides will exchange documents, present witness testimony, and typically file written submissions at the end of the hearing.
Potential Remedies for Unfair Dismissal
If the Industrial Court finds that your dismissal was unfair, it has the power to order various remedies:
- Reinstatement: The court may order that you be reinstated to your former position without loss of salary, benefits, or seniority. However, this remedy is rarely granted, as the employment relationship is often deemed to have broken down.
- Compensation in Lieu of Reinstatement: If reinstatement is not practicable or suitable, the court may order the employer to pay monetary compensation. Generally, this is calculated at one month's last drawn salary for each completed year of service. Incomplete years do not count towards this calculation.
- Back Wages: The court may also award back wages, calculated from the date of dismissal up to the date of the award. This is subject to a statutory cap: a maximum of 24 months' last drawn salary for confirmed employees, and 12 months for probationers. Back wages can include fixed allowances and commissions if they formed a substantial and consistent portion of your earnings.
- Other Contractual Entitlements: The court may also order payment of contractual bonuses, leave encashment (for untaken leave), and other contractual entitlements.
It's important to note that employees have a duty to mitigate their losses by actively seeking alternative employment after dismissal. Any post-dismissal earnings may be deducted from back wages, though the burden of proving failure to mitigate lies with the employer.
Appealing the Industrial Court Decision
If either party is dissatisfied with the Industrial Court's decision, they can file an appeal to the High Court within 14 days from the date of receiving the award. Reasons for appeal typically include procedural errors during the trial or misinterpretation/misapplication of the law.
Conclusion
Being unfairly dismissed can be a challenging experience, but in Malaysia, you are not without recourse. The Industrial Relations Act 1967 provides a robust legal framework to protect employees' rights and ensure fair treatment. By understanding what constitutes unfair dismissal, knowing the difference between direct and constructive dismissal, and following the proper legal channels within the strict 60-day time limit, you can confidently challenge an unjust termination. Seeking timely legal advice from an employment lawyer can further strengthen your case and help you secure the justice and compensation you deserve, safeguarding your professional future in Malaysia.