Introduction

In Malaysia, by virtue of Section 20 of the Industrial Relations Act 1967 (“IRA 1967”), an employee who considers that he or she has been dismissed without just cause or excuse by the employer, may make a representation in writing to the Director General of the Industrial Relations Department for unfair dismissal or constructive dismissal.

If the dispute cannot be resolved amicably at the conciliation stage before the Industrial Relations Department, the dispute will be referred to the Industrial Court for adjudication. The aggrieved employee may then seek appropriate remedies from the Industrial Court such as reinstatement or compensation in lieu of reinstatement and back wages.

A question that recently arose in the Court of Appeal is whether an employee who claims that he or she has been dismissed without just cause or excuse by their employer, can file an action in the civil court seeking damages arising from the dismissal instead of pursuing the statutory dispute resolution process as provided for under the IRA 1967.  

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Salient Facts

In the case of 7-Eleven Malaysia Sdn Bhd v Ashvine Hari Krishnan, the Respondent was a Senior Manager of the Human Resources Department of the Appellant. The Respondent reported to the General Manager of Human Resources of 7-Eleven Malaysia Sdn Bhd, the Appellant, who had concerns about the Respondent’s performance and who had raised this with the Respondent on several occasions.

The Respondent eventually tendered her resignation on the grounds that she was unfairly treated, bullied and harassed. The Respondent then filed an action at the High Court seeking damages for alleged wrongful dismissal by the Appellant. In essence, the Respondent contended that she was constructively dismissed and sought to be compensated in damages by the Appellant.

The Appellant then filed an application to strike out the Writ and Statement of Claim filed by the Respondent. This application was dismissed by the High Court.

The Appellant then filed an appeal to the Court of Appeal and in deciding the appeal, the Court of Appeal had to determine whether it is an abuse of process for an employee who claims to have been wrongfully dismissed by the employer, to file an action in the civil court and seek damages as opposed to exercising statutory rights available under the IRA 1967.  

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The Decision by the Court of Appeal

The Court of Appeal, in allowing the Appellant’s appeal, held that any award of damages to an employee arising from a dismissal by an employer, would be limited to the pay in which the employee would have earned had proper notice been given in accordance with the employee’s employment contract.

In this case, as the Respondent had served her notice period, the Court of Appeal found that there were no outstanding sums to be awarded to the Respondent and accordingly, the action filed by the Respondent at the High Court was allowed to be struck out as applied for by the Appellant. The Court of Appeal was of the view that the action commenced by the Respondent in the High Court was an abuse of court process.

The Court of Appeal enunciated that an employee who considers that he or she has been wrongfully dismissed by an employer, must invoke the statutory remedies provided for under the IRA 1967 instead of filing an action in the civil courts.

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Application of the Fung Keong Principle

This decision by the Court of Appeal appears to be in line with the decision by the Federal Court in the case of Fung Keong Rubber Manufacturing (M) Sdn Bhd v Lee Eng Kiat & Ors [1981] 1 MLJ 238.

In Fung Keong, the Federal Court held that if an employee files an action in the civil courts seeking damages arising from his or her dismissal by the employer, the damages which the employee would be entitled to would be limited to the notice period prescribed in the employment contract.

In addition, the Federal Court also held that the damages which the employee is entitled to could be reduced if it is found that the employee could have but failed to secure another job during the notice period.

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Key Takeaways

This decision by the Court of Appeal appears to put to rest the question as to whether an employee could seek damages against the employer in the civil courts for wrongful dismissal as opposed to pursuing remedies in the Industrial Court in accordance with the provisions of the IRA 1967.

It is now clear that if an employee files such an action in the civil courts, the employee would only be entitled to the pay which the employee could have earned had he or she served the notice period as provided for under the employment contract.

It also establishes that the Industrial Court is the appropriate forum for disputes relating to wrongful dismissals to be adjudicated. 

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This article is intended to be informative and not intended to be nor should be relied upon as a substitute for legal or any other professional advice.

About the author

Rohan Arasoo Jeyabalah
Partner
Construction, Energy & Engineering, Employment & Labour, Commercial, Dispute Resolution (Court Litigation, Arbitration & Adjudication)
Harold & Lam Partnership
rohan@hlplawyers.com