The concept of “unfair dismissal” or “unlawful termination” is not new in Malaysia. There has been an increased awareness about employee rights in Malaysia, but there are also many misconceptions that have not been corrected. Here are a few salient points about unfair dismissal law in Malaysia.
- There is a limitation period to file a complaint of unfair dismissal. An employee has 60 days from the date of dismissal to file a complaint of unfair dismissal pursuant to Section 20 of the Industrial Relations Act 1967. An employee who is dismissed with notice may file the complaint at any time during his notice period, but not later than 60 days from the expiry of his notice. Failure to file the complaint in time will result in the complaint being barred by limitation. Depending on the circumstances, the employee may have other recourses in the civil court, but the damages and nature of remedies would be different.
- Cases don’t end up in the Industrial Court immediately. The first step in lodging a complaint of unfair dismissal is to lodge the representation at the Industrial Relations Department (“IRD”). After this, the IRD will request both the employer and the employee to attend a conciliation meeting, in hopes that the matter can be amicably resolved. In the event there is no conciliation, the IRD has a discretion whether to refer the claim to the Industrial Court. Depending on the backlog of cases, it can sometimes take more than a year for a claim to be referred to the Industrial Court. There is no guarantee that the claim will be referred, although those who are not happy with the decision of the IRD can apply for judicial review of the decision at the High Court.
- The conciliation meeting at the IRD is not a court hearing. During the conciliation meeting, the IRD officer does not have any power to decide on the merits of the complaint. The IRD will not make any ruling or decision as to whether the dismissal is unfair. Their primary purpose is to get parties to reach an amicable settlement. Parties should feel comfortable to discuss matters freely during the conciliation meeting since Section 54 of the Industrial Relations Act 1967 provides that no evidence shall be given of any conciliation meeting other than a written statement agreed to and signed by the parties.
- Remedies are fixed in the Industrial Court. In the event of a successful claim for unfair dismissal, the Industrial Court will award either: (a) reinstatement and backwages; or (b) backwages ad compensation in lieu of reinstatement. Backwages are meant to cover the period between the termination date and the award of the Industrial Court, but they are capped at 24 months (confirmed employees) and 12 months (probationers). Compensation in lieu of reinstatement is usually awarded at the rate of 1 month for every year of service, but this is not a fixed formula and is still subject to the discretion of the Court. Further, any total monetary sum is also subject to discretionary deduction by the Court after taking into account various mitigation factors such as conduct of the employee and post-dismissal earnings. The monetary award given is meant to cover all losses relating to the termination, and employees cannot claim for additional damages for things like loss of future earnings, loss of reputation, or mental and emotional stress.
- Industrial Court Awards are public record. Industrial Court Awards can be accessed by the public at the Industrial Court website (mp.gov.my). As such, both employers and employees should be mindful that issues relating to the termination and all evidence adduced thereto may be easily accessible by third parties. An unfavourable decision could be damaging to both the employee and the employer, whether in terms of future job prospects or reputation in the market. As such, both parties must always weigh this against other relevant factors when determining whether an out of court settlement will be more beneficial. An out of court settlement can be confidential and if so requested, the terms of the settlement will not be recorded in a Court award.