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Because of the firm’s experience as a commercial litigation firm for business organisations, we have a knack for advising corporate clients to pre-empt problems and disputes.

How To Terminate An Employee

Set out below is the procedure for you to terminate your employee.

  1. Termination notice - Best to be sure of the reasons for termination as you will have to state the same in the letter of termination. Check the employee’s contract of employment for the termination notice. Usually, a termination notice is provided for in a contract of employment. If you wish to terminate immediately, you may have to pay compensation in lieu of notice. In respect of a complaint to the Human Resource department (HR), such complaint can be lodged by the employee to the Department of Industrial Relations (“the Department”) at its nearest office within 60 days from the date of the dismissal if the employee feels that he/she has been wrongly dismissed. However, no complaint will be entertained if he/she fails to do so within the prescribed period. The aforesaid complaint is merely to reinstate your employee to his/her former position. Once the Department receives this complaint, it will take steps to facilitate a settlement between you and your previous employee. In the event that there is no settlement, the Department will refer the complaint to the Industrial Court for an award.

  2. Referral to the Industrial Court - When your previous employee’s complaint has been referred to the Industrial Court, you may want to consider hiring a lawyer to defend your case. At the Industrial Court, the presiding judge will have to determine the following:
    1. Whether the employee has been dismissed or terminated
    2. Whether the dismissal or termination was with just cause or excuse
    3. Whether to order reinstatement
    4. Should an order for reinstatement be unsuitable; the amount of damages to be awarded in lieu thereof

Sometimes, termination is not outright. For example, your employee was forced to resign or tender a resignation. It has long been established that a forced resignation is deemed to be a dismissal or termination. There is also something known as constructive dismissal. Constructive dismissal is where the employer commits a serious breach of contract which entitles the employee to resign or treat himself/herself as having been dismissed. In other words, an action taken by you which leads your employee to say “I cannot work here, I must go”. There are myriad grounds that may lead to a claim of constructive dismissal, such as non-payment of salary, demotion, reduction of wages, sexual harassment, reassignment or transfer and reduction of job functions.

Once your employee can prove dismissal, you as the employer will have to prove that the dismissal was with just cause or excuse. You will have to show that you were right to dismiss your employee whether for his/her action or inaction. Normally, you will have to hold a domestic inquiry to see if your employee is guilty of the misconduct alleged and what punishment is to be meted out before terminating his/her employment.

In cases of constructive dismissal, you will have to show that there is no breach on your part or the breach is not sufficiently important to justify the employee’s resignation.

Section14(1) of the Employment Act 1955 expressly requires an inquiry before dismissal to be conducted for employees whose monthly wages do not exceed RM1,500.00. For employees’ salary which exceeds RM1,500.00, it is advisable to hold a domestic inquiry to determine whether the employee is guilty of the alleged misconduct or offence. However, the lack of a domestic inquiry does not automatically mean that you have wrongfully dismissed him/her. In cases where the misconduct is grave, a domestic inquiry need not be held, for example in the cases of theft, sexual harassment or fraud.

You are to write to the employee stating the specific charge with sufficient details of the offence as well as the time, date and venue of the impending domestic inquiry. You have a right to suspend the employee with or without salary pending the findings of the domestic inquiry. It is best to inform the employee that he/she is entitled to bring along witnesses or documentary proof at the inquiry. The employee is also entitled to request you to produce documents which may help him/her at the inquiry.

The panel of the domestic inquiry consists of 3 people: one chairman and 2 panel members. All 3 should not be involved in the investigation process and ought to be independent. They can be your other employees from other departments and the chairman is usually of a higher ranking position. You will also need a prosecutor and usually, such person will be from your human resource department.

At the hearing, your prosecutor will first read out the charges and go on to prove the offence by the calling of witnesses and producing documentary evidence. The subject employee is entitled to cross-examine your witnesses. The subject employee will then be asked to enter his/her defence and be at liberty to call his/her own witnesses and produce documentary evidence. The employee’s witnesses are also subject to cross-examination by your prosecutor.

It is best to record the proceedings of the inquiry as the same will be used as evidence in the Industrial Court.

At the conclusion of the inquiry, the panel will then render its decision and recommend the appropriate punishment. It is the discretion of the management whether to follow the recommended punishment. The management can:

  1. Dismiss the employee without notice (though you may have to compensate him/her in lieu of notice)
  2. Demote the employee
  3. Impose any other lesser punishment deemed just and fit, and where a punishment of suspension without wages is imposed, it shall not exceed a period of two weeks

When the Industrial Court finds that your employee has been wrongfully dismissed, the Industrial Court can order reinstatement or in the event that reinstatement is not suitable, an award of damages in lieu thereof. The damages awarded are capped at 24 months of the employee’s salary, the amount of which is up to the discretion of the presiding judge.