Question:
.
“Hi Mr. Yeo, my business has been facing significant challenges lately, and I find it necessary to terminate the contracts with some of my employees. For this, I have checked the terms of my company’s employment contracts (signed with them), and it appears that either party can initiate the termination of the employment relationship by providing one month’s notice in writing.
.
Hence, I would like to inquire whether I can just simply give them one month’s written notice to terminate their employment. As I am very concerned about the possibility of my employees’ lodging complaints against me with the Labour Department. I would greatly appreciate your advice and guidance on proceeding with this matter. Thanks! “
.
Answer:
.
1. In Malaysia, the employment relationship between employers and employees is governed by two primary legislations: the Employment Act 1955 and the Industrial Relations Act 1967. These acts provide the legal framework for various employment-related matters, including termination procedures, rights, and obligations of both employers and employees.
.
2. Unlike the employment concept in the United States, where employers and employees can generally terminate their relationship “at will“, Malaysia’s labour laws place significant emphasis on safeguarding the rights of employees.
.
3. In Malaysia, the termination of employees’ contracts requires employers to provide “just cause and excuse” for the dismissal. This principle was affirmed by the Court of Appeal in the landmark case of Hong Leong Equipment Sdn. Bhd. v Liew Fook Chuan and Anor [1996] 1 MLJ 481. In this case, the court recognized that the employment tenure of employees should be protected similarly to property rights unless there are valid and justifiable grounds for termination:
.
“The legislature has willed that the relationship of employer and workman as resting on a mere consensual basis that is capable of termination by the employer at will with the meagre consequence of paying the hapless workman a paltry sum as damages should be altered in favour of the workman. It has accordingly provided for security of tenure and equated the right to be engaged in gainful employment to a proprietary right which may not be forfeited save, and except, for just cause or excuse”
.
4. In other words, in Malaysia, the termination of employment contracts goes beyond the requirement of providing sufficient notice. Employers are obligated to provide just cause and excuse when terminating the employment of their employees as well.
.
5. It is pertinent to note that the same legal requirement of just cause and excuse does not apply when employees themselves wish to terminate their employment. In such cases, the employment concept aligns more closely with the “at-will” principle commonly seen in the United States. As long as employees provide sufficient notice as per the terms outlined in their employment contract or agreement with the employers, their resignation is considered sufficient and legally compliant.
.
6. What constitutes “just cause and reason” for termination is not explicitly defined in the Employment Act 1955 or the Industrial Relations Act 1967 in Malaysia. However, based on established case law, the courts generally consider several factors to determine if just cause and reason exist for termination.
.
7. These factors typically include the initial reasons for hiring the employee, the responsibilities outlined in the employment contract, and whether the actions or behaviour of either party violate commonly accepted practices to the extent that it becomes impossible for the employer to continue the employment relationship. It is important to note that the evaluation of just cause and reason is determined on a case-by-case basis, considering the specific circumstances and facts surrounding each situation.
.
8. Therefore, when it comes to terminating an employee, it is generally required to have a justifiable reason, typically rooted in the employee’s misconduct. According to the case of Goon Kwee Phoy v. J&P Coats (M) Bhd, it is crucial that the employer must clearly state the reasons for dismissal/ just cause and excuse in the termination letter. The employer cannot add other reason(s) after the employee lodged a complaint, and the Court will not consider these ‘new grounds for dismissal’.
.
9. In situations where an employee has not committed any wrongdoing, but the employer intends to terminate the employment relationship due to financial constraints or other business-related reasons, there are specific mechanisms available in Malaysia. The employer can opt for a voluntary separation scheme (VSS) or a mandatory separation scheme (retrenchment) to manage the termination process.
.
10. Regarding retrenchment, employers in Malaysia have a responsibility to not only ensure that the compensation offered complies with the Employment (Termination and Lay-off Benefits) Regulations 1980 but also to take various measures into account before implementing such layoffs.
.
11. We will explain this in our next article. If you have any further inquiries or require additional assistance on this matter, please feel free to contact us: https://wa.link/q3kmv5
.
Like & Follow our Facebook Page to get more legal information.
.
You can learn other legal information from our website：https://www.yeolaw.my/
.
#YeoLawChambers #YLC #employmentdispute #labourlaw #employmentagreement #Bandardatoonn #法律 #杨律师事务所 #劳工纠纷 #劳工合同 #劳工法 #新山律师
