INTRODUCTION

When an employee challenges his dismissal in the Industrial Court, the employer must prove the reason for the dismissal and that it constituted just cause or excuse for the dismissal.  Often the reason for dismissal will be stated in the dismissal letter and will be either gross misconduct, redundancy or poor performance.

The issue then arises as to whether the employer can rely on other stated reasons which did not form part of the employer’s decision at the time of dismissal? The answer is no.

The Court will examine the reason which operated in the employer’s mind at the time of dismissal and the employer must be able to justify the dismissal by reference to that reason. This means an employer cannot dismiss first and later search for a better reason to justify the decision.

THE LEGAL POSITION

Under section 20 of the Industrial Relations Act 1967 (“IRA”), an employee who considers that he has been dismissed without just cause or excuse may make representations for reinstatement. Where the matter proceeds to the Industrial Court, the Court will determine whether the employer had just cause or excuse to dismiss the employee.

The starting point is the Federal Court case of Goon Kwee Phoy v J & P Coats (M) Bhd [1981] 2 MLJ 129 which stated that,

“If the employer chooses to give a reason for the action taken by him, the duty of the Industrial Court will be to enquire whether that excuse or reason has or has not been made out. If it finds as a fact that it has not been proved, then the inevitable conclusion must be that the termination or dismissal was without just cause or excuse. The proper enquiry of the court is the reason advanced by it and that court or the High Court cannot go into another reason not relied on by the employer or find one for it.”

30 years later, the Federal Court in Maritime Intelligence Sdn Bhd v Tan Ah Gek [2021] 10 CLJ 663 reinforced this position even further. The Federal Court held that the question of just cause or excuse must be assessed by reference to the reasons, factors or events operating in the employer’s mind before or at the time of dismissal. Matters discovered only after the dismissal cannot be relied on to retrospectively justify the decision.

PRACTICAL EFFECT

The practical rule is therefore clear: a dismissal stands or falls by the reason which caused the employer to dismiss the employee at the material time.  This principle has important implications for employers. If the termination letter says that the employee was dismissed for poor performance, the employer must be prepared to prove poor performance. If the dismissal was for misconduct, the employer must prove the misconduct. If the employer later discovers other stronger reasons to justify dismissal, this cannot be relied on by the employer to justify dismissal.

WHAT IF THE TERMINATION LETTER STATES NO REASON?

A termination letter which does not state any reason does not automatically make the dismissal unlawful. The Federal Court in Maritime Intelligence stated that, where no reason is given, the matter does not simply end in favour of the employee. The Industrial Court must still determine what was the reason which operated in the mind of the employer at the time of dismissal.

In practical terms, an employer should not assume that saying less in the termination letter is always safer. A vague or silent termination letter may create uncertainty and make it harder for the employer to prove what genuinely led to the dismissal.

PRACTICAL CONSIDERATIONS FOR EMPLOYERS

1. Identify the Real Reason Before Dismissal

Before dismissing an employee, the employer should be clear on the reason of the dismissal. The reason should be specific. If the employer relies on poor performance, there should be evidence such as performance reviews, warnings, targets, appraisals or improvement plans. If the employer relies on misconduct, the relevant incidents, dates, policies and evidence should be identified and documented. A dismissal decision should not be made on general dissatisfaction alone.

2. Investigate Before Acting

Employers should investigate before deciding to dismiss. This may involve reviewing documents, speaking to relevant witnesses, considering the employee’s explanation, and assessing whether the evidence supports the allegation.

Where misconduct is alleged, the employee should be given a fair opportunity to respond. A properly conducted show cause process or domestic inquiry can help demonstrate that the employer acted fairly and based its decision on established facts. The purpose is not merely procedural. It helps ensure that the employer is relying on the correct reason before the dismissal decision is made.

3. Keep the Documents Consistent

The employer’s documents should show a clear and consistent progression of the case. For example, if the show cause letter concerns poor performance, the termination letter should not suddenly rely on misconduct unless that allegation was properly put to the employee and formed part of the decision-making process.

Similarly, inquiry findings and termination documents should not give conflicting explanations. Consistency strengthens the employer’s position. Inconsistency may suggest that the employer was searching for reasons after the dismissal had already occurred.

CAN SUBSEQUENTLY DISCOVERED MISCONDUCT BE USED TO THE EMPLOYER’S ADVANTAGE IN THE INDUSTRIAL COURT?

While the employer cannot rely on a reason which did not operate in its mind to justify the dismissal, in Maritime Intelligence, the Federal Court held that the employer may still introduce evidence of the same as it will be relevant to the remedy that the Industrial Court may award if it decides in favour of the employee.

CONCLUSION

In summary, employers should keep the following in mind: –

1. The reasons which caused the dismissal must be:-

• a) Accurately and fully stated in the dismissal letter;
• b) Sufficiently strong to justify dismissal in law;
• c) Supported by evidence sufficient to prove the reason for dismissal on a balance of probabilities standard.

2. A dismissal should be treated as the final step in a properly documented process, not the beginning of a search for justification.

3. Before dismissing an employee, employers should ensure that the reason is clear, supported by evidence, fairly put to the employee where necessary, and accurately reflected in the termination documents.

4. In an Industrial Court challenge, the question will not be whether the employer can later find a better reason. The question will be whether the employer had just cause or excuse at the time it decided to dismiss.

Disclaimer: This article is for general information only and does not constitute legal advice or legal opinion. It should not be relied upon as a substitute for specific legal advice. No person should act (or refrain from acting) based on this article without obtaining advice on the specific facts and circumstances. Halim Hong & Quek does not accept responsibility or liability for any loss or damage arising from reliance on this article. Halim Hong & Quek reserves the right to update, amend or withdraw this article at any time. All rights reserved.

Subscribe to DISPUTES DECODED BY HHQ, our bi-monthly legal update, at https://mailchi.mp/hhq/2nofd6rjlt to receive our latest legal updates and articles. You may also visit the HHQ website at https://hhq.com.my/insights/ for further articles and insights from our team.

About the authors

Siva Kumar Kanagasabai
Senior Partner
Head of Dispute Resolution Practice Group
Halim Hong & Quek
kumar@hhq.com.my

○
Omar Qayyum bin Hamdan
Associate
Dispute Resolution
Halim Hong & Quek
omar@hhq.com.my