Labor Law/Labor Column Part 4 Dismissal

Labor Law/Labor Column Part 4  Dismissal


1. Introduction

Employment contracts are based on the continuous relationship of trust between the company and employees. Long-term misunderstandings will tend to create emotional conflicts, and dismissal is deprives of employee income, therefore it is important to understand the laws and regulations concerning dismissal. In this article we will mainly describe the basic laws and regulations of dismissal.

2. Types & Requirement of Dismissal

Depending on reasons, dismissal mainly divided into (1) Ordinary dismissal (2) Punitive dismissal (3) Dismissal for the purpose of reorganization. In principle, company need a reasonable reasons (just cause or excuse)(1)to dismiss employees. Company must take note that the judgment of valid reasons are varies depending on the cause of dismissal & specific case
(1)Refer to Article 20 of Industrial Relations Act

(1) Ordinary Dismissal
Ordinary dismissal refers to dismissal other than punitive dismissal and dismissal for the purpose of reorganization, and also includes dismissal which there is a reason for dismissal on the employee such as lack of ability or failure of work attitude. A dismissal for reasons of poor performance can also be a reasonable reason. However, as with other dismissal procedures, it has to be understand that for each individual case just reasons and appropriate procedures are required. In terms of proper procedures, it is important for the company to do its best to demonstrate the employee's abilities until the dismissal, and it is important that the company and employees communicate fully through written documents. There are various causes can be considered for poor performance, the company is expected to investigate the cause and make efforts to avoid dismissal such as change of placement. Specifically, there are the flow of procedure:
a) Preparation of warning letters (written the causes and reasons for poor performance, if no improvement there will be dismissal, the period for improvement)
b) After improvement training, coaching
c) Deciding whether to dismiss

(2) Punitive Dismissal
Punitive dismissal means that the company dismisses as a means of disciplining against employees. Conflict is often involved, including validity of selection of whether there is ground for disciplinary punishment or dismissal, therefore the company needs to proceed with carefully. In addition, if there is a misconduct with proper internal investigation ("Due inquiry") is done, advance notice (Employment Law Article 14 (1a)) and dismissal allowance (Employment Law rule 4) became unnecessary. In the event that the presence of the relevant employee adversely affects the workplace environment, it will be possible to suspend discontinue before the decision of disciplinary action (Article 14 of the Employment Act 2).
Although there is no definite on internal investigation, but below is the procedure which is considered effective for being recognized as a justifiable reason.
a) If fraudulence is found, send a document stating the detail of the misconduct to the employee.
b) Next, if sufficient information can’t be obtained from employee with respect to fraudulent acts, an internal investigation is carried out, including whether they had sufficient countermeasures to prevent fraud.
c) In addition, conducting the internal investigation procedure (Domestic Inquiry) by third-party organizations in the company.
When an employee receives disciplinary action without undue or just reason, he / she can appeal to the Labor Office within 60 days from the notice of disciplinary action (Article 69 (3) of the Employment Act).

(3) Dismissal for the purpose of reorganization
In Malaysia, dismissal for the purpose of reorganization means reduction of surplus personnel. It is considered effective to be dismissed for reorganized according to The Code of Conduct for Industrial Harmony 1975. Although this rule is a guideline, but it is commonly referred to as a fair and reasonable means in the court. Therefore, below are the flow of dismissal for the purpose of reorganization stipulated in the same rule.
a) First, in discussion with representative of employees, union, Ministry of Human Resources, on dismissal of organization, it is advisable to provide:
1. Freezing new employment of employees
2. Restricting overtime work
3. Restricting working on holidays and public holidays
4. Reduction in the number of working days
5. Reduction in working hours
6. Retraining of employees

b) In addition, even if company decide that dismissal of organization is necessary, it is advisable to undergo procedures such as:
1. Inform employees as soon as possible
2. Setting of early retirement system
3. Notification to the labor office
4. Re-hiring support in cooperation with the Ministry of Human Resources
5. Implementation of organized dismissal over the period
6. Notifying the representatives of the employees and unions first.

c) When choosing an employee who is subject to dismissal, it is prescribed in Article 60N of the Employment Act (Principles of Foreign Workers First Out) that it should be dismissed from a foreign employee. After dismissed foreign employee and further choosing an employee who is subject to dismissal from among the remaining employees, it should be dismissed in a way backwards from the most recently employed person (Last In First Out Principles (LIFO Principles). In this rules stated that it should be decide in consideration of stipulated standards as below:
1. Necessity to increase the efficiency of operations
2. Ability, experience, skills and qualification of each employee for improving the efficiency of operations
3. Number of years of service and position (Foreigner or Regular employment or Temporary employment)
4. Age
5. Family situation
6. Other countries

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All data and commentary included in this material was edited and written by Legal Professional Corporation One Asia based on published information at the time of this material creation, but it does not guarantee its accuracy and completeness. In addition, we are not responsible for any damage caused by using the information in this material.


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"One Asia Lawyers" is the first ASEAN legal specialization in Japan, which was established in order to offer advice on legislation in Japan and ASEAN countries, including Malaysia. For inquiries regarding this article, please send in email to


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