The year 2020 brought significant challenges, particularly due to the economic repercussions of the Covid-19 pandemic. As a result, many employees faced unjust termination or dismissal by their employers. It is crucial for individuals to be aware of their rights and the steps they can take if they believe they have been wrongfully terminated.

In Malaysia, the Employment Act 1955 (hereafter referred to as “EA 1955”) is the primary legislation governing employment matters. The EA 1955 outlines the minimum benefits employees are entitled to under their employment contracts. However, this Act does not apply universally; it primarily covers:

• Employees earning a monthly salary of RM2,000 or less
• Manual laborers, regardless of their salary
• Individuals operating or maintaining mechanically propelled vehicles
• Supervisors overseeing manual laborers
• Employees working on vessels

Industrial Relations Act 1967 (IRA 1967)

If your employment has been terminated and you do not fall under the categories outlined above, the Industrial Relations Act 1967 (IRA 1967) may provide a remedy. According to Section 20(1) of the IRA 1967, an employee who has been dismissed must submit a written representation to the nearest Director General of Industrial Relations Office within 60 days of their dismissal.

It’s important to remember that in Malaysia, an employer must have just cause or excuse to terminate an employee’s service

Types of Termination of Service

There are several methods of terminating employment. This guide offers a brief overview:

a) Direct Dismissal
Direct dismissal occurs when an employer explicitly terminates an employee’s contract, which can happen for several reasons, including:

• Misconduct
• Poor performance
• Retrenchment
• Business closure
• Non-confirmation during the probation period
• Withdrawal of a job offer before the employee begins work

b) Indirect Dismissal
Indirect dismissal happens when an employer violates a fundamental term of the employment contract, effectively forcing the employee to resign. This is often referred to as constructive dismissal, where the employee feels dismissed due to the employer’s actions or intentions to no longer uphold the employment agreement. In such cases, the employee may leave their position, believing they were dismissed without just cause.

Examples of indirect dismissal include:

• The employee is relieved of their duties without valid justification.
• The employee is presented with an ultimatum to resign or face termination.
• The employee is transferred, reassigned, or demoted as a means of pressuring them to quit, despite no change in benefits or salary.
• The employer violates the employee’s rights, such as reducing or withholding pay or benefits without consent.
• The employee files a legitimate complaint and the employer fails to address it.

Reinstatement (or Compensation in Lieu of Reinstatement)

The primary remedy provided by the Industrial Court is the reinstatement of the employee. However, if reinstatement is not feasible or appropriate under the circumstances, the Court may grant compensation instead.

The compensation is typically calculated using the formula of one month’s salary multiplied by the number of years of service. For example, if your monthly salary is RM3,000 and you have worked for 5 years, the calculation would be:

Award: RM3,000 x 5 years = RM15,000

Backwages

Backwages are subject to a statutory limit of 24 months. Additionally, deductions may be applied based on any earnings received after dismissal or if the employee’s own actions contributed to their dismissal.

If you would like to learn more about your rights or seek legal advice regarding employment issues, feel free to reach out to us for further assistance.