Industrial Relations

From the Editorial Desk

We are approaching the end of 2015 and many of you may have already started packing your bags for vacation. With Christmas and 2016 around the corner,  taking leave from work is simply irresistible.

Just before you do that, remember to check whether you have sufficient days of leave with you because the last thing you want to do is to unintentionally taking more than you were entitled to which may cause unnecessary friction and in some extreme instances, become a cause of dismissal.

In trying to bring our own set of seasons greetings to you, we present to you our article prepared by Phan Yit Leng where she writes about an overview on the Industrial Relations in Malaysia which is relevant to employers and employees alike.

Penned by Lai Chee Hoe

An Overview on Malaysian Industrial Relations

The number of claims by dismissed employees for unfair dismissal has increased every year. While most of these are settled at the level of conciliation at the Department of Industrial Relations, nevertheless, hundred are not resolved. They are then referred to the Industrial Court.

In Malaysia, employees have certain rights which are protected by the statutes such as Employment Act 1955, Industrial Relations Act 1967 etc. Employees cannot have their services terminated at will by their employer. Thus, the success rate of employers defending the termination of an employment contract is not high as most courts favor the employee. This leaves the employer at the losing end which costs time, money and productivity. These are some reasons, amongst others, why employers are found to have dismissed an employee without just cause and excuse:-

  • Unawareness of employee rights;
  • Lack of proof of the dismissed employee’s guilt, poor performance or redundancy; and
  • Failure to adhere to proper procedures prior to a termination.

It should not be an issue for any manager, human resource practitioner, or any other interested person to ignore the employee’s fundamental rights. In order to keep abreast with the changes in the case law, they should regularly read the awards of the Industrial Court which can be found on the website of the Industrial Court (

More often, employers terminate an employee for good reason but the evidence is seriously lacking. Without written evidence, the employer’s case is unconvincing. Furthermore, most cases take at least a year or more to reach the Industrial Courts. As time passes, company witnesses may have difficulty recalling the events leading up to a termination thus their evidence is unconvincing in court. Other difficulties may include key witnesses who are no longer working in the organization, may be unwilling to speak on the company’s behalf or even untraceable.

The employers are also disadvantaged by the Industrial Court Awards which basically reveals certain information about the organization. For example, employee’s salary range, organization hierarchy, proprietary information and other data.

In order to avoid lawsuits, it is advisable for all employers to have standard termination procedures in place as follows:-

  • To have an employee handbook with rules and regulations of the workplace;
  • To ensure no manager dismisses an employee without valid reason;
  • To have standards in place so the reasons for termination are legal and fair; and
  • To train all employees in progressive discipline.

In some situations, an employer may on the grounds of misconduct dismiss an employee. However, it should be noted that the dismissal on the grounds of misconduct is somehow valid only after due inquiry is carried out. This serves the purpose of giving an employee the right to be heard and is in accordance with the principles of natural justice. At such an inquiry, a charge would be preferred against the employee setting out the complaint against the employee. The employee would have to show cause through answering those complaints, calling witnesses and presenting his evidence in rebuttal if any.

On the other hand, when an employee has been dismissed unjustly, the procedures to claim damages at the appropriate avenue are as follows:

  1. To lodge a complaint to the Director General Industrial Relations (‘DGIR’) Department at the nearest former place of employment within sixty (60) days of one’s dismissal;
  2. A conciliatory meeting will be held to explain the principles and law that are applicable including judgment of the courts, both the Industrial Court and civil courts, so that both parties are aware of their rights and liabilities;
  3. If the conciliation procedures are not successful, the DGIR will then refer the case to the Minister of Human Resources, who will refer the matter to the Industrial Court for adjudication and for an award if he thinks fit;
  4. If the Minister decides not to refer a complaint to the Court the employee may apply to the High Court to quash the Ministerial decision;
  5. The Industrial Court then goes to consider whether the termination of the employment is unlawful or whether it is justified. If the employer successfully states a valid and fair reason, dismissal is therefore considered lawful and with good cause;
  6. However if the Industrial Court rules that the termination is unlawful, the Court then makes an “Award” to reinstate the employee to his former position or in lieu of awards, proper compensation;
  7. The remedies in cases of dismissal are  reinstatement into the former employment or compensation in lieu of reinstatement and back wages. Award of back wages are calculated from dismissal date to the final date of hearing up to a maximum period of 24 months and the compensation in lieu of reinstatement based on the formula of 1 month salary for every year of service.

A dismissed employee can opt for alternative machinery which is to initiate an action to sue the employer in the civil courts either for breach of contract or wrongful dismissal. Most lawsuits do not go to trial and end with both parties settling.  This can be beneficial for the employee because they will receive some form of compensation from the employee and further eliminate unnecessary expenses.

Having said that, understanding the employment law in depth is crucial for every employer and employee. Employees should know their rights so that they are not treated unfairly. The employers should understand employment law to avoid legal action being taken against them as these laws and regulations are complex and constantly changing, especially case law.

If you have questions in any of these areas of employment law, or if you are searching for trusted and sound legal advice or representation, please do not hesitate to contact us. Our firm can assist you in understanding and enforcing your rights in all areas of employment law, including employment agreements and service contract, workplace policies, terminations, discrimination and harassment, leaves of absence, unemployment compensation, wage and remunerations, workers’ compensation and others.

written by Phan Yit Leng