General article on employment law
Let us consider some statistics: – in 2018 alone, a staggering sum of RM34 million was awarded by the Industrial Court against errant employers for unlawfully dismissing their former employees*.
It was further reported that between January 2018 to December 2018, the number of unlawful dismissal cases brought before the Industrial Court totalled 2,935. This works out to approximately 245 new cases per month, or an average of 9.4 cases per day.
Finally, latest data reveals that between January 2019 to March 2019, 948 unlawful dismissal cases were brought before the Industrial Court, and the sum of RM12.3 million was awarded against errant employers for unlawful dismissal. Even without whipping out the calculator, astute readers can already see that the average for that period is higher than in 2018. However, it is data only for the first 3 months of the year 2019, and we await the soon-to-be-released data by the Ministry of Human Resources to see if the average sums awarded and the number of cases have increased.
(*Source: Statistik Pekerjaan dan Perburuhan, Siri 19 Bil 1/2019, published by the Ministry of Human Resources (Kementerian Sumber Manusia) of Malaysia]
Suffice to say, this is not a small figure! The question is-why is this so? The simplest explanation is that the law and procedure relating to dismissal of employees are not followed; otherwise, the Industrial Court would not be awarding such sums against employers. While that may be the simplest explanation, I would suggest that the more pertinent reason lies in the underlying mentality of employers when dismissing their employees.
Generally, in the eyes of an employer, it is merely exercising its rights in dismissing an employee for whatever reasons (be it misconduct, poor performance, retrenchment, etc); to the employee however, the experience of being dismissed can be extremely personal even if the purported reasons behind the dismissal is “not personal” but for “business reasons” or for (insert reason here). I wish to point out that the relevant law, i.e. Section 20 of the Industrial Relations Act 1967, gives the right to a former employee who “considers” that s/he was dismissed without just cause or excuse, to bring legal action for unlawful dismissal against his/her former employer. The key word is “considers”, i.e., the former employee can bring legal action as long as s/he subjectively considers him/herself to have been dismissed without just cause or excuse. Further, a unique feature of a claim under Section 20 of the Industrial Relations Act 1967 is that although it is the former employee who sues for unlawful dismissal, it is the employer that must be able to demonstrate to the satisfaction of the Industrial Court that there was just cause or excuse in dismissing.
Below are the following issues commonly encountered with employers: –
· Lack of knowledge of the law. Employers are not fully aware of Malaysian laws governing the employer-employee relationship. They assume or wrongly believe to possess all rights to dismiss, much like the American-style of hire-and-fire-at will; or
· Having knowledge of the law, but disregarding and/or underestimating the law nonetheless. Such employers usually operate under the illusion that the matter can be “settled” by negotiations and “agreement” (it often does not end up being so); or
· Impatience in dealing with employees who commit misconduct / are poor performers by not following the necessary procedure, lacking sufficient evidence; or
· Bloody mindedness. The employer has already concluded that a certain employee is to be dismissed and in doing so, dispenses with the law and procedure in dismissing the former employee.
In that regard therefore, let us clarify/debunk some common misconceptions about the law relating to dismissal of employees in Malaysia.
1) Termination notice in employment contract
Common misconception: –
“I as an employer can rely on the notice provision in the employment contract. As long as I abide by the terms, I can dismiss.”
A typical termination clause is along the lines of “Either party … may terminate the employment contract by giving X months’ notice or by paying to the other party X months’ wages in lieu of notice.”
An employer cannot simply rely on the termination clause in the employment contract. In a claim for unlawful dismissal under Section 20 of the Industrial Relations Act 1967, if the employer is the party exercising its right to dismiss as per the termination clause, then the employer must be able to demonstrate that there is just cause or excuse in doing so. If the employer fails to demonstrate to the satisfaction of the Industrial Court that the dismissal was with just cause or excuse, it may lose the case and potentially be made to cough up to 24 months backwages, and a further compensation in lieu of reinstatement that typically is in the region of 1 month per year of service.
2) “I as an employer can sack an employee if s/he has committed misconduct / is a poor performer”
An employer has the right to dismiss an employee for serious misconduct or for poor performance. What needs to be borne in mind is that certain steps need to be taken before dismissal is carried out. The steps need to be documented. And the steps to be taken differ between dismissal for misconduct vs dismissal for poor performance.
The burden remains firmly on the employer to demonstrate that the employee has committed serious misconduct or is a poor performer.
3) “In Singapore/Hong Kong/America/any other countries, I can sack easily / don’t need to do this”
We live in Malaysia, not Singapore/Hong Kong/America/any other countries, and if companies wish to do business in Malaysia, then the laws of Malaysia must be followed. Companies doing business in Malaysia are advised to obtain the services of a specialist in Malaysian employment law to ensure compliance to the local laws and to minimize legal risk(s).
4) “This was the template used by my predecessor/superior/etc”
The Industrial Court is unlikely to accept the above explanation. It is prudent to obtain the services of specialist in Malaysian employment law to peruse the contract and to identify any potential issues that may arise.
The laws of Malaysia are very pro-employee. Care must be taken to ensure that companies are operating within the boundaries of the law. Failure to abide by the law can lead to a very expensive exercise which companies can ill-afford to be liable for.
This is article is brought to you by Justin Lee and is copyrighted accordingly. Justin is an employment law specialist who can advice, draft and train your human resource managers.