The Malaysian Industrial Court may not agree

The Industrial Court may not agree with the third column

There are many misconceptions about domestic inquiries in Malaysia. This article aims to clarify the doubts surrounding domestic inquiries and answer some of the common questions asked by both employers and employees.

What exactly is a domestic inquiry?

A domestic inquiry is a part of an internal process conducted by an employer to investigate whether an employee has committed an act of misconduct.  The domestic inquiry may share some similarities with a court proceeding in that there will usually be a prosecuting officer and a panel which will deliberate and make findings. Parties are also usually allowed to call witnesses to testify. If the employee is found guilty, the management will then determine what kind of punishment to be meted out.

Is a domestic inquiry required under law?

In the event there is a misconduct committed by the employee, the Employment Act 1955 states than an employer can only impose punishment on the employee if he has conducted “due inquiry”. The Act does not define what is “due inquiry”, and it does not necessarily mean that an employer must conduct a formal domestic inquiry. What is important is that the employer must investigate the matter fairly. In some cases, even having a discussion with the employee in question can be considered as “due inquiry”.

If a company does not hold a domestic inquiry but terminates an employee for misconduct – how will this affect their case if the employee lodges a complaint of unfair dismissal?

As stated above, under Malaysian law, the failure to hold a domestic inquiry is not fatal to the employer’s case at the Industrial Court.

If a domestic inquiry is not strictly required by law – what’s the point of having one?

The Industrial Court, in a decided case, summed up the benefits of a domestic inquiry succinctly:

“A due inquiry properly conducted and well documented serves to ensure that a disciplinary authority has acted only after giving fair consideration to the matter. It also provides a reliable record for the employer to turn to when, due to the effluxion of time, witnesses have become unavailable or memories have faded, the employer is faced with difficulties in having to prove his case before an industrial tribunal. Confronted with such forensic difficulties, an employer might well have to make extensive references to the records of the domestic inquiry.”

What are the disadvantages of having a domestic inquiry?

Generally speaking, a domestic inquiry can be a very time consuming exercise, especially if the employer intends to be as thorough as possible.

Also, because the panel of the domestic inquiry should technically be independent, there is a chance that they could decide that the employee is innocent. In such a situation, it would be very difficult for the employer to justify termination if its own domestic inquiry found the employee innocent of the charges.

What is the “proper” way to conduct a domestic inquiry?

The overriding principle of a domestic inquiry is that an employee who is accused of a misconduct should be given the opportunity to be heard and to defend themselves against those allegations. It is best practice (but not mandatory) for a domestic inquiry to follow these guidelines:

  1. An employee should first be given a show-cause letter which sets out with precision the allegations made against the employee. The employee should be requested to provide their explanation in writing as to why disciplinary action should not be taken against them.
  2. The show cause letter must be as detailed as possible with regards to the alleged offence, so the employee can properly explain it or defend themselves.

Poorly drafted show cause letter:

 “You are alleged to have committed insubordination and acting against the best interest of the Company.”

Better drafted show cause letter:

“You are alleged to have ignored and/or refused to comply with the instructions of your immediate manager, Mr. Tan Boon How (sent to you by e-mail dated 1 March 2015) to finalise the Company’s balance sheet on or before 30 March 2015. This is despite repeated reminders and requests by Mr. Tan, including but not limited to e-mails dated 15 March 2015, 28 March 2015 and 1 April 2015. You subsequently only finalised the balance sheet on 28 April 2015.””

  1. In the event the employees’ response to the show cause letter is not satisfactory, the employer may consider convening a domestic inquiry. The employee should be given a notice of inquiry which sets out the exact charges being levelled against him.
  2. The employee should be given sufficient and reasonable notice of the domestic inquiry so he will have time to prepare his defence. What is reasonable will depend on the circumstances. For example, if an employee is being charged with 20 offences, it is not reasonable to only give them 24 hours to prepare for the domestic inquiry.
  3. Where reasonable and practicable, the employee should be given supervised access to documents which might assist him in his defence [subject also to requirements of confidentiality etc]. The employee should also be allowed to call witnesses at the domestic inquiry.
  4. The panel of the domestic inquiry should consist of employees of the company who are more senior than the employee, and from different departments if possible. Members of the panel should not have prior knowledge about the charges against the employee and should not have been involved in the investigations.
  5. The panel should base their decision solely on the evidence presented before the domestic inquiry. Their findings should be recorded and detailed, stating reasons why they found the employee guilty/innocent.
  6. Parties should maintain the confidentiality of the domestic inquiry and it should only be shared with other employees on a need to know basis.

 What happens if the employee is not happy with the decision of the domestic inquiry?

As the domestic inquiry is a purely internal process, whether the employee can “appeal” against the decision of the domestic inquiry would depend purely on the company’s policies and procedures. If there is an appeal procedure set out in the company’s policies, the company must comply with it to avoid any perception that they are acting unfairly or prejudicial to the employee.

If the employee feels they were unfairly terminated based on the finding of the domestic inquiry, the employee may lodge a complaint for unfair dismissal pursuant to Section 20 of the Industrial Relations Act.

In what circumstances can an employer terminate an employee immediately?

Terminating an employee immediately without notice or payment of salary in lieu of notice is usually referred to “summary dismissal”. Summary dismissal is allowed in cases where the act of misconduct is so serious that the employer is justified in terminating the employee immediately.  Again, there is no exact definition of what amounts to serious misconduct and it will depend on the facts of the case.

That being said, there are some types of misconduct which would warrant summary dismissal – for example, committing a crime at work (eg: theft, fraud), giving or taking bribes, or intoxication at work causing risk of injury or death.

Can employee get legal representation at the domestic inquiry?

It is up to the company to decide whether the employee can be legally represented during the domestic inquiry proceedings. Usually, the company will not allow external legal representation as the inquiry is, by its nature, meant to be “domestic” (ie no outside parties involved).

But sometimes, the company is represented in the domestic inquiry by its inhouse legal counsel. Isn’t that legal representation and isn’t that unfair to the employee?

While an inhouse legal counsel may be legally qualified (and may even be a current or former practising lawyer, depending on the jurisdiction), this is not the same as having external legal representation. The inhouse legal counsel acts as an employee or representative of the company and usually the appearance of an inhouse legal counsel will not amount to sufficient grounds to invalidate the domestic inquiry.

Proper Dismissal Procedures to Avoid Consequences
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