In unfair dismissal claims, employees may sometimes seek additional remedies such as punitive damages or other perceived employment entitlements. This raises the question of how far the court can entertain such claims. Employers, on the other hand, would naturally seek to minimize any sums claimed by employees. This article aims to provide insights for both sides of the divide by examining the legal remedies that can be granted by the Industrial Court.

Industrial Court is not a Court

Before one can even embark on a journey to explore the type of remedies that may be granted by the Industrial Court, one must first appreciate the fact that the Industrial Court is not a civil court. It is a creature of the Industrial Relations Act 1967 (“IRA 1967”) and it does not enjoy the inherent jurisdiction that is commonly enjoyed by the civil courts (Lee Wah Bank Limited v National Union of Bank Employees [1981] 1 MLJ 169). 

As such, the Industrial Court is only entitled to grant damages and/or reliefs that are permitted under the IRA 1967 (Hotel Jaya Puri Bhd v National Union of Hotel, Bar & Restaurant Workers [1980] 1 MLJ 109). The Industrial Court cannot freely create new type of damages to be granted to claimants, otherwise there is a risk of the decision being corrected upon judicial review or appeal. 

  • Main Remedy – Reinstatement or Compensation in Lieu of Reinstatement

The main remedy that may be granted by the Industrial Court is reinstatement. However, reinstatement is not always granted in practice, as the relationship of trust and confidence between the dismissed employee and employer would often be irreparable and the dismissed employee may have even found alternative employment by then. 

In such situations, the Industrial Court may grant compensation in lieu of reinstatement. Practice Note 3 of 2019 (“PN 3/2019”) stipulates that the current rate of compensation is one month’s salary for each year of completed service. There shall be no compensation in lieu of reinstatement for any uncompleted year of service.  

There have been reported instances where the Industrial Court granted two months’ salary for each year of service as compensation in lieu of reinstatement, on the basis that the enhanced sum was meant to be punitive in nature (KFC Technical Services Sdn Bhd v Industrial Court of Malaysia & Anor [1992] 1 MLJ 564).

For employers, it is crucial to note that compensation in lieu of reinstatement can only arise if the employee is entitled to be reinstated in the first place. For example, an employee past the retirement age as at the date of any Industrial Court award would not have been entitled to reinstatement. Therefore, such employee is not entitled to compensation in lieu of reinstatement at all (Unilever (M) Holdings Sdn Bhd v So Lai @ Soo Boon Lai & Anor [2015] 4 MLJ 326). 

  • Backwages

Based on the Second Schedule of the IRA 1967, the Industrial Court may grant backwages to employees that have been unfairly dismissed:

  • Confirmed employees – Up to 24 months 
  • Probationers – Up to 12 months

The granting of backwages is within the Industrial Court’s discretion and it is entitled to impose any necessary deductions it deems fit, such as:

  • Contributory negligence of the employee – If the employee is found to be also at blame for the circumstances of his / her dismissal, an appropriate deduction may be made. For example, in Thayalan Kanayah v Felxtronics Technology (Penang) Sdn Bhd [2019] 2 LNS 2497, the Industrial Court ordered a scaling down of 80% on the sum of backwages to be awarded on the basis that the claimant was also at fault.
  • Any severance sum that has been paid – If any severance sum was paid to the employee, then such sum should be deducted from any compensation to be made (Ahmad Fauzan bin Aziz & Ors v Dynacraft Industries Sdn Bhd [2010] ILJU 73). 
  • Post-dismissal earnings – The Industrial Court is entitled to make deductions for post-dismissal earnings, which would take into account of factors such as period of unemployment after the unfair dismissal and the claimant’s new salary. For example, in Foo Jia Jun v Caas Integration Sdn Bhd & Anor [2018] ILJU 146, the Industrial Court made a deduction of 70% on backwages for post-dismissal earnings, as the claimant as only unemployed for 2 months and his new employment was with a higher salary. Even if no evidence is adduced as to the post-dismissal earnings of an employee, the Industrial Court is entitled to make such deductions as it deems reasonable (DTS Trading Sdn Bhd v Wong Weng Kit [2008] 1 ILR 548). The Industrial Court does not do a mathematical exercise (eg: calculating and awarding the difference between the new salary and his last drawn salary) but rather makes deductions using a discretionary percentage.

The Industrial Court is entitled to take into account of commissions when computing backwages as well. In Lim Seng Huat v Fiamma [1996] 3 MLJ 604, the Court of Appeal held that the claimant was entitled to the sales commission as part of his backwages, as the commission exceeded the basic salary and that he had been obtaining the commission every month without fail. 

  • Costs

Although the Industrial Court is empowered under section 5 of the Industrial Relations Regulations 1967 to grant costs, it rarely does so in practice as the rule of thumb is that parties bear their own costs. However, legal costs may still be granted at the judge’s discretion if the situation warrants so. 

In Athanasius Allapan Anthong v Myteksi Sdn Bhd [2019] 1 ILR 66, the claimant’s lawyer had needlessly wasted two hearing dates. As such, the Industrial Court had awarded costs of RM 5,000 to be paid by the claimant’s lawyer personally to the company. 

  • Loss of Future Earnings 

The Second Schedule of the IRA 1967 explicitly prohibits the granting of any compensation for loss of future earnings. This was echoed in PN 3/2019. 

  • Contractual Entitlements

Under PN 3/2019, the Industrial Court may also order contractual bonus, payment in lieu of leave not taken and other contractual benefits as well.  The Industrial Court will not award discretionary bonuses, since the employer has the discretion to decide whether such bonus should be granted in the first place. (Lim Seng Huat (supra). 


From a brief survey of the case laws on the issue of damages that can be granted by the Industrial Court, the paramount consideration in any Industrial Court’s mind when granting damages would be:

(1) whether does it have the jurisdiction to do so; and 

(2) whether is it just and equitable to grant the quantum that is sought for. 

Practitioners and parties alike should therefore approach their cases with utmost care and attention to detail. They must carefully analyze the legal arguments and evidence presented in order to make a compelling case as to whether the relief can and/or should be granted.


This article was written by Leow Ho Eng (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. Have a question? Please contact us.


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