In Malaysia, every worker has a right to livelihood, which means they are entitled to fair treatment and protection in the workplace, including protection from unfair dismissal. Unfair dismissal occurs when an employer terminates an employee’s contract without a valid or justifiable reason, or without following the proper legal procedures. The Industrial Relations Act 1967 (“IRA 1967”) governs matters relating to unfair dismissal, providing employees with legal avenues to challenge their termination if it was unjust.
What Constitutes Unfair Dismissal?
Under Malaysian law, unfair dismissal can occur in several ways. It typically involves dismissals that are carried out without just cause or excuse, which is a key provision under the IRA 1967. Common examples include dismissals based on discrimination, arbitrary decisions, or in violation of the terms outlined in the employment contract.
Additionally, employers cannot dismiss an employee immediately for poor performance without giving proper notice or an opportunity to improve. The Employment Act 1955 states that an employee must be given a chance to remedy their performance through a Performance Improvement Plan (PIP), and termination must follow a reasonable process. In IE Project Sdn Bhd v Tan Lee Seng [1987], the Industrial Court ruled that before dismissing an employee for poor performance, the employer must first issue a clear warning and allow the employee a fair chance to improve. If the employer fails to provide sufficient notice or a reasonable opportunity for improvement, the dismissal may be deemed unlawful. Immediate dismissal is generally reserved for cases of serious misconduct, such as theft or workplace violence, where a thorough investigation is conducted, and the employee is given the chance to defend themselves.
Reinstatement or Compensation?
After an unfair dismissal claim, two main outcomes are possible: reinstatement or compensation in lieu of reinstatement.
1. Reinstatement: If the Industrial Court finds that the dismissal was unfair, the employee may be ordered to be reinstated. This means the employer must restore the employee to their previous position with the same terms and conditions of employment as before the dismissal. Reinstatement is not just about giving back the job—it also requires the employer to ensure that all benefits, including salary, seniority, and entitlements, are reinstated. This order serves as a form of remedy to make the employee whole again, restoring their livelihood.
It’s important to note that reinstatement does not equate to reemployment. In reemployment, the employee may be hired again, possibly with new terms and conditions, which could result in a different job role, responsibilities, or pay. Reinstatement, on the other hand, means that the employee returns to their exact previous position and work conditions.
2. Compensation in lieu of Reinstatement: If reinstatement is not possible (for instance, the employee no longer wishes to return to the same employer, or if the employer’s working environment is no longer viable), the Industrial Court may award compensation instead. This compensation is intended to provide financial relief to the dismissed employee for the loss of their job. The amount of compensation typically depends on factors like the employee’s length of service, their salary, and the circumstances surrounding the dismissal.
The court will take into account both the employee’s loss of income and any non-financial losses suffered as a result of the dismissal, such as emotional distress or reputational damage. Compensation can also include any unpaid wages, bonuses, and benefits that were due but not paid at the time of dismissal. Compensation is an alternative remedy to ensure the employee is compensated for the unfair loss of their employment, but it does not restore the employee’s career or the opportunity to continue working at the same organization.
Conclusion
Unfair dismissal is a serious matter that can significantly impact an employee’s livelihood and career. Employees who believe they have been unfairly dismissed should seek proper legal advice to understand their rights and options. Whether it’s pursuing reinstatement to restore their position or seeking compensation for the loss of income and career opportunities, expert guidance can help navigate the legal processes effectively. It’s essential to act swiftly to challenge unfair dismissal, as there are strict timelines within which claims must be made under Malaysian law.