Employers are generally expected to issue a show cause letter before taking disciplinary action against an employee. This forms part of procedural fairness, allowing the employee an opportunity to explain or defend themselves before any decision is made.
However, is a show cause letter always legally required before dismissal? If an employee deliberately refuses to comply with a clear management instruction despite prior discussions and warnings, would the absence of a show cause letter automatically render the dismissal without just cause or excuse?
The High Court considered this issue in Dimension Bid (M) Sdn Bhd v Mohd Faizzal Bin Baharulrazi
Factual Background
- The employee had been employed since 2007 and was based in Kemaman, Terengganu.
- Due to operational requirements during the COVID-19 period, the Company issued a transfer letter directing him to report to its Labuan office by 1.4.2021.
- Instead of reporting for duty, the employee appealed against the transfer and did not attend work at the new location by 1.4.2021.
- On 2.4.2021, the Company issued a letter releasing him from employment on the basis that his failure to comply with the transfer order and his absence from the Labuan office constituted serious misconduct and a breach of the terms of his employment.
- No show cause letter was issued prior to the termination.
- Eventually, the employee filed a claim of unfair dismissal against the Company.
- The Industrial Court held that the dismissal was done without just cause or excuse, partly on the basis that the Company ought to have considered the employee’s appeal and communicated the outcome before issuing the termination letter. The Industrial Court also considered the Company’s failure to issue a show cause letter.
- Dissatisfied with the Industrial Court’s decision, the Company appealed to the High Court.
Court’s Findings
On appeal, the High Court overturned the Industrial Court’s award.
The High Court reaffirmed that transfer within an organisation is a recognised management prerogative, provided it is exercised bona fide and does not breach contractual terms.
Although it was open to the employee to appeal against the transfer, this did not excuse his obligation to comply with the directive to report to the Labuan office by 1.4.2021.
The High Court further accepted that the transfer was a business decision made in good faith, as the Company had repeatedly informed the employee that the relocation was due to reduced operations in Kemaman, Terengganu.
The High Court held that the absence of a show cause letter was not fatal. The show cause process is to ensure that an employee is aware of the allegations and is given an opportunity to respond. In this case, the employee already had knowledge of the transfer directive, had engaged in discussions with the Company, and had even lodged an appeal. Hence, there was no real procedural prejudice arising solely from the failure to issue a formal show cause letter.
Key Takeaways
This decision confirms that while issuing a show cause letter is generally part of good disciplinary practice, it is not an absolute legal requirement in every situation. Courts will focus on substance over form. Where misconduct is clear, the employee already has knowledge of the allegations, and there has been a deliberate refusal to comply with a lawful instruction, the absence of a show cause letter alone will not automatically render a dismissal unlawful.
From a HR risk management perspective, as a best practice, employers should still issue show cause letters in most situations to minimise procedural challenges. However, this case demonstrates that dismissal may still be defensible without one where there is strong evidence that the employee was fully aware of the directive, understood the consequences, and intentionally chose not to comply. Proper documentation of instructions, prior communications, and employee responses remains critical in defending such decisions.
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This article was written by Leow Ho Eng (Senior Associate) from Donovan & Ho’s employment law practice.
Donovan & Ho is a law firm in Malaysia, and our employment practice group has built a reputation for providing strategic employment advice to local and global organisations. Our team of employment lawyers provide advice on employment law and industrial relations including review of employment contracts, policies and handbooks, advising on workforce reductions, and managing dismissals of employees for poor performance or misconduct. We also represent clients in unfair dismissal claims and employment-related litigation.
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