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Topic 10b - Edited Termination and Dismissal

Termination of employment in Malaysia can occur through various means such as expiration of a fixed term contract, retirement, resignation, or dismissal. Dismissal must be for just cause such as misconduct, poor performance, redundancy, or business closure. Employees have security of tenure and dismissals can be challenged as wrongful or unfair if due process was not followed, such as warnings and training for poor performance. Remedies for wrongful dismissal include pursuing claims at the Labour Court, Industrial Court, or civil courts.

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37 views27 pages

Topic 10b - Edited Termination and Dismissal

Termination of employment in Malaysia can occur through various means such as expiration of a fixed term contract, retirement, resignation, or dismissal. Dismissal must be for just cause such as misconduct, poor performance, redundancy, or business closure. Employees have security of tenure and dismissals can be challenged as wrongful or unfair if due process was not followed, such as warnings and training for poor performance. Remedies for wrongful dismissal include pursuing claims at the Labour Court, Industrial Court, or civil courts.

Uploaded by

Nurul Izati
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Termination of employment

and Dismissals
• Related legislations
• In Malaysia, the employer-employee relationship is
regulated principally by the Employment Act 1955
and to some extent by the Industrial Relations Act
1967. Both Acts perceive the employer – employee
relationship as being contractual in nature. While
the EA describes such relationship in terms of
contract of service , the IRA uses the term contract of
employment.
How an employment contract may be terminated:
• When the contract period on a fixed term contract
expires
• When he retires upon attaining the retirement age
• When he resigns voluntarily from his job
• When he resigns in protest against the breach of
contract by the employer (constructive dismissal)
• on the initiative of his employer due to any of the
following situations:
• The employee is unable to perform the work for
which he was employed
• The employee’s job performance is not satisfactory
• The employee has abandoned his employment
• There is redundancy (retrenchment)
• There is a closure or sale of the employer’s business
• The employee is found guilty of misconduct
(dismissal)
Security of tenure
• The Malaysian courts uphold the concept of security
of tenure of employment, whereby the simple
invoking of a termination clause of a contract of
employment to terminate an employee’s service is
not acceptable. Hence, every termination, if
challenged by an employee must be proven by the
employer to be with just cause or excuse.
 There can be no doubt that a dismissal demolishes
an employee’s security of tenure as he no longer has
a job to sustain his livelihood. Thus the IRA provides
a mechanism for an employee to challenge his
dismissal on the ground that it is without just cause
or excuse. In most case the matter is referred to the
Industrial Court for it to decide whether the
dismissal is with just cause or excuse
What amounts to just cause or excuse

The four accepted grounds for termination of an


employee’s services:
1. Misconduct
2. Poor performance
3. Redundancy
4. Closure or sale of business
 Retrenchment arises from redundancy, which
refers to a surplus of labour.

Employees will become redundant for a number of


reasons such as:
1. Reorganization of the company’s structure for
better efficiency
2. Closure of unprofitable product lines or sections
3. Merger of two or more companies
4. Introduction of a new technology or process which
reduces labour requirement
5. Financial hardship of the company
 Management’s prerogative to reorganize the
company.
The industrial Court has handed down an abundance
of awards involving retrenchment. All of its awards
observe the principle that the reorganization of
business is a function within the power and
prerogative of the management .
 The industrial court while recognizing the right of
the employer to determine e.g. the size of his
workforce, has however consistently maintained that
it must be convinced that the exercise of that power
was carried out without any victimization or
unfairness.
Obligation of management under the code of
conduct for industrial harmony

 Recommendations:
 Limitation on recruitment
 Restriction of overtime work
 Restriction in number of shifts
 Reduction in the number of hours of work
 If retrenchment becomes necessary, the employer
should adopt the following measures:
 Provide early warning to the workers concerned
 Implement schemes for voluntary separation and
retirement including a payment of redundancy and
retirement benefits
 Retire employees who are beyond their normal
retirement age
 The Industrial court has repeatedly emphasized in its
awards that the right of firing an employee at the
first sign of laziness or unsatisfactory performance is
not suitable because today security of tenure of
employment is a fundamental principle in
employment law and industrial relations. In this
respect, an employer should try to rectify the
shortcomings of an unsatisfactory employee before
resorting to dismissal.
 An employer must ensure that the employee has
been told that he is not reaching the standards
 Informed of the standards he is expected to reach
 Given the necessary training
 Given sufficient time to improve on his performance
Dismissals

 Summary dismissal (instant dismissal)


 This is one form of termination that is swift and
overrides the consideration of due notice or payment
of salary.
 Summary dismissal is restricted by legislation in
particular sec 20 of the IRA which imposes the ‘just
or excuse’ burden on the employer.
Dismissals

 Wrongful Dismissal is where an employee has been


dismissed without notice or an employee has not been
given the right amount of notice, or the employment is
terminated contrary to the contract. Wrongful Dismissal is
based upon the actual contract between the employer and
the employee and so breaches of that contract by the
employer could give the employee the right to sue for
Wrongful Dismissal.
 Unfair Dismissal
Unfair Dismissal is when the following happens:
Dismissals

1. An employee is dismissed and they qualify for the


right to bring an Unfair Dismissal claim.
2. The employer did not have a fair reason to
dismiss the employee.
3. Or, the employer did have a fair reason, but the
matter was dealt with unfairly.

 Unfair dismissal is a statutory right as it is


covered by an Act of Parliament.
 For a termination of employment to be with just
cause or excuse, there ought to be proper
investigation into the allegation and the employer
must be able to prove on a balance of probabilities
that the employee is guilty of the act of misconduct
and that the misconduct committed is sufficiently
serious in order to warrant the severe punishment of
dismissal.
Constructive dismissal

Condition for claims of constructive dismissal


 The workman has the burden of proving that he has
been constructively dismissed and must notify his
employer of his stand that he considers himself
constructively dismissed before resigning and
lodging a representation seeking reinstatement.
Few conditions established by employees:
 The company by its conduct had breached a term or
terms (express or implied) of the contract
 The employee has terminated the contract by reason
of the company’s conduct and the conduct is
sufficiently serious to entitle the employee to leave at
once.
 The employee did not delay in terminating the
contract following the breach.
Remedies for wrongful dismissal

An employee including a probationer who feels that


he has been wrongfully dismissed or this contract of
employment has been unjustly terminated may
resort to one of the following avenues
 Labour Court
 Industrial Court
 Civil Courts
Labour Court
 The Labour court’s power to inquire into dismissals
is limited to sec 14 of EA, i.e. Dismissal for
misconduct.
 The Court has no power to order reinstatement of
the employee to his former position. It only has
jurisdiction to order payments such as wages and
termination benefits.
 It is important to note that the Labour Court has no
jurisdiction to hear any such case if the employee
concerned fails to lodge his complaint within 60 days
from the date on which the decision (under sec 14) is
communicated to him either orally or in writing by
his employer.
Industrial Court
 This court offers a better recourse for employees who
have been wrongfully dismissed. Generally, the
monetary award available under the industrial court
is far greater than what an employee would receive if
he is successful in a suit for wrongful dismissal at
the Labour Court or the Civil Courts
Civil Courts
 The right to seek damages under the contract in
common law still exists but is seldom resorted. This
is because of the alternative avenues available and
partly because of the time and costs involved
litigating a claim through this avenue.
 It is useful for those who are not covered by the EA
or IRA. (e.g. Public sector employees) or those who
have not acted within the prescribed time limit of 60
days.

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