Unfair Dismissal: What Malaysian Employees Should Know
How the Industrial Court handles unfair dismissal claims and what remedies are available.
Published: 28 February 2025 · Employment
The Legal Framework for Dismissal
Employment in Malaysia is primarily governed by the Employment Act 1955, the Industrial Relations Act 1967, and the Federal Constitution. While the Employment Act sets out minimum statutory benefits such as wages, working hours and termination benefits, the Industrial Relations Act provides the mechanism for workers to challenge dismissals they believe are unjustified. The key principle under Malaysian industrial law is that an employer must have "just cause or excuse" for dismissing an employee. This is not a mere slogan. It is a substantive legal requirement that the Industrial Court examines rigorously in every unfair dismissal claim.
What Constitutes Unfair Dismissal
An unfair dismissal occurs when an employer terminates an employee without a valid reason or without following proper procedures. Common examples include dismissals based on fabricated performance issues, redundancy exercises that are sham reorganisations, dismissals without conducting a proper domestic inquiry, and terminations that are discriminatory in nature. The Industrial Court has consistently held that even where an employee has committed misconduct, the employer must still comply with the principles of natural justice. This means the employee must be given notice of the charges, a reasonable opportunity to defend themselves, and an unbiased hearing. A failure to follow these procedural safeguards can render an otherwise justified dismissal unfair.
Filing a Claim with the Industrial Court
Employees who believe they have been unfairly dismissed must act quickly. Under Section 20 of the Industrial Relations Act, a dismissed employee must file a representation to the Director General of Industrial Relations within 60 days of the dismissal. Missing this deadline can be fatal to the claim, although the Director General does have limited discretion to accept late filings in exceptional circumstances. If conciliation efforts fail, the matter is referred to the Minister of Human Resources, who may then refer it to the Industrial Court for adjudication. The Industrial Court process is less formal than the civil courts, but the legal principles involved are complex, and legal representation is strongly recommended.
Remedies Available
If the Industrial Court finds that a dismissal was without just cause or excuse, it has two primary remedies available. The first is an order for reinstatement, which restores the employee to their former position or a comparable one, with back pay for the period of unemployment. The second is compensation in lieu of reinstatement, which is typically calculated at one month's salary for each year of service. The court decides which remedy is appropriate based on the circumstances of the case. Reinstatement is the primary remedy under the law, but in practice, compensation is more commonly awarded where the employment relationship has broken down irretrievably.
At Messrs S.K. Song, we act for both employees and employers in industrial disputes. Whether you have been dismissed and want to know your options, or you are an employer seeking to ensure that your termination procedures are legally compliant, our team can provide practical and effective advice. Contact us at 07-334 2188 to arrange a consultation.