Termination – Employment Act

Termination with notice

s. 12(1) of EA states that either party to a contract of service may at any time give to the other
party notice of his intention to terminate such contract of service.
s. 12(2) of EA states that the length of such notice shall be the same for both employer and
employee and shall be determined by a provision made in writing for such notice in the terms
of the contract of service, or, in the absence of such provision in writing, shall not be less
than
a) four weeks' notice if the employee has been so employed for less than two years on
the date on which the notice is given.
b) six weeks' notice if he has been so employed for two years or more but less than five
years on such date.
c) eight weeks' notice if he has been so employed for five years or more on such date.
Provided that this section shall not be taken to prevent either party from waiving his right to a
notice under this subsection.
The length depends on how long you have been working with the company. If you are
probationer, contract will allow you to terminate by giving 24 hours’ notice. Joining as an
executive, period of probation can range between 3 – 6 months. If not executive period of
probation 1 – 3 months. The confirmation is not as of right or automatic thing, so, during the
probation must fulfil the standard of the performance as provided by the company, if met the
company will confirm you. Once confirmed, the company will give an offer letter.
Compagnie Due Cambodge (Claire Estate) Cha’ah v Boy Kanamah [2006] 1 CLJ 983. Based
on that case, the court held that the employer may unilaterally withdraw the termination letter
without the consent of the employee provided that it was done not less than 7 days before its
enforcement. This case seems to say employer had serve termination letter to this employee
and then the employer decides to withdraw that termination letter without the employee
consent and the court said it is allowed as long as it was done not less than 7 days before the
enforcement of the notice.
However, the understanding, concept/ principle, which allow the employer to unilaterally
withdraw the termination letter without consent of the employee must be used with care. This
is based on the fact that the purpose of the notice is to allow the employee to secure new job.
Therefore, if the employer wants to terminate the contract, by giving the notice, the employer
is allowing the employee to find another job. Employee submit resignation letter; he is giving
the employer ample notice to find someone else for the job or to reorganise the work so that
others can take the job. The purpose is to give both parties a chance to make plans for the
future. So, if you are going to allow the employer to withdraw the letter a week before the
effective date then it will cause hardship to the employee and more so if he had secured
another job after receiving the termination letter.
Payment of wages in lieu of notice
s. 13 (1) of EA states that either party to a contract of service may terminate such contract of
service without notice or, if notice has already been given in accordance with section 12,
without waiting for the expiry of that notice, by paying to the other party an indemnity of a
sum equal to the amount of wages which would have accrued to the employee during the
term of such notice or during the unexpired term of such notice.
If the employer wants to terminate the contract but does not want to wait for the notice, the
employer can pay you salary in lieu of notice. Flexibility is given by the law.
Termination without notice
S 13 of EA, either party may terminate the contract of employment without notice by paying
compensation to the other party at the rate of pay for the period of notice or equivalent to the
terms of the notice that has not expired.
In other words, a contract of sevice may be terminated by either party without notice or, if
without notice has been provided in accordance with Provision II without waiting for the
notice to expire, by paying 'damages' to the other amount equal to the amount of the wage.
In the case of Rheem (M) Bhd v Metal Industry Employees Union [1990] 1 ILR 550, Court
said that when a contract is terminated with a notice (whether given by the employer or
employee) the effective date of termination is the expiry date. But when the contract is
terminated without notice, the effective date of termination is the date of termination
S. 13(2) of EA, states that party to a contract of service may terminate such contract of
service without notice in the event of any wilful breach by the other party of a condition of
the contract of service. (Either party had a breach the terms of the contract (requirement) then
termination can happen.)
s. 15(1) of EA states that an employer shall be deemed to have broken his contract of service
with the employee if he fails to pay wages in accordance with Part III.
Wages (consideration of the contract) period is a month (1 st April – 30th April), employer is
given extra 7 days (1st May – 7th May) as to expiry of the wage period. If 7th of May the
employer failed to pay, employee can treat that the contract has been repudiated, therefore,
employee can terminate the contract without notice because the employer failed to pay the
wages within the given period.
Kilang Beras Ban Eng Thye S/B v Yacob bin Mohamed [1998] 5 MLJ 195, the employer
fails to pay wages due to some quarrel within the management. The employees terminate
their contract of service without notice and claim for termination benefits. The counsel for
employer argued that the employee does not entitle to termination benefit because the
termination was unlawful. He further submitted that the breach was not a wilful breach
because there was only delay in the payment of salaries and thus the respondent could not
have lawfully terminated the contract. The court held that there was a breach of contract of
service by failing to pay the wages of the employee. The fact that the employer fails to pay
wages will entitle the employee to terminate their contract of service without notice as
stipulated in S 13 (2). Once the employee has proved that the employer fails to pay wages in
accordance with S 19, the court will infer that such breach of condition is wilful or
intentional.
s. 15(2) of EA states that an employee shall be deemed to have broken his contract of service
with the employer if he has been continuously absent from work for more than two
consecutive working days without prior leave from his employer, unless he has a reasonable
excuse for such absence and has informed or attempted to inform his employer of such
excuse prior to or at the earliest opportunity during such absence.
Employee will be breaching the employment contract if he fails to go to work without the
approval of the employer for 2 consecutive working days. This is because the consideration
on the part of the employee in a contract of employment is to go to work personally.
Therefore, it is very clear as to absent can only be for 2 consecutive days. For instance,
employee did not go to work on Friday, (Saturday and Sunday are the employee’s rest day)
and Monday. So, the employee did not go to work for 2 consecutive days as the weekends
does not count, so employer can only terminate him on Tuesday. Leave should be applied 3
days before the leave. However, if you have submitted for leave in less than 3 days, that will
be categorised as emergency leave.
Dharmavaja @ Abh Malik a/l Abd Wahab v Asian Ceramic S/B [2000] 2 MLJ 28, the
employer dismissed the employee when the employee failed to come to work for 2
consecutive days. However, the 2nd day of absence falls on Sunday which is the claimant’s
day off. The court held that in order for S15(2) of EA to apply, the employee must be absent
from work for two continuous working days. In the present case, the employer had dismissed
the employee when the two continuous days had not passed. At the time of the date of
dismissal letter, there were no two consecutive days of absence. The employer has wrongly
considered the 2nd day of absence as being a working day when the fact that the 2nd day of
absence was a Sunday, the claimant’s day off. There has not been a breach of contract under
S 15 (2) as there has been no absence for more than two consecutive working days.
The Common Law gives a minimum notice period of one month if the contract is unclear or
does not stipulated the length of notice.
In the case of Sellamuthu v Karai Nagar Estate [1981] 1 MLJ 262, the plaintiff worked as a
foreman on the estate and was given a one month notice to terminate his service. He is
seeking a declaration that his dismissal from employment is invalid and he is seeking
damages for wrongful dismissal. The Court held that the defendant has the right to terminate
the plaintiff's service by giving one month's notice and the application for declaration must be
rejected.
Termination on the ground of fixed term contract
S11(1) of EA states that a contract of service for a specified period of time or for the
performance of a specified piece of work shall, unless otherwise terminated in accordance
with this Part, terminate when the period of time for which such contract was made has
expired or when the piece of work specified in such contract has been completed. (a contract
of service for a specified period of time/performance of work shall terminate when period is
over/work is done, unless otherwise stated in the contract)
Under some circumstances the company may need the services of the employer for a short
period of time, 2 years or 3 years, it depends, so in such circumstances, the fixed term
contract will end when the terms end. For example, the Director of GLC company is
appointed for 3 years, once 3 years is over, if no renewal, the contract will come to an end.
The process to renew is that 3 months before the contract expires, the employer will send a
letter asking whether the employee wishes to continue or terminate the contract.
This kind of contract indicates that the service of that employee is required or needed only for
a short period of time-fixed term. Nevertheless, the parties are allowed to renew the contract
after the fixed term ended.
If renewed more than 3 times, the court will decide that it is a permanent contract.
The status of a fixed term contract can be changed to a permanent one if there is evidence to
show that the employer had indicate otherwise expressly or impliedly.
Han Chiang School/Penang Han Chiang Associated Chinese School Association v National
of Union of Teachers in Independent Schools, West Malaysia & Industrial Court [1990] 1
ILR 473, the court stated that the employer must beware that is fixed term contract must be a
genuine one. For it is a contract which is of a permanent nature but dressed up as a fixed term
contract, the Court may still require the company to justify whether the dismissal is with just
cause or excuse and in line with the principle of natural justice implied under section 20 (3)
of the Industrial Relation Act 1967.
M Vasagam Muthusamy v Kesatuan Pekerja-pekerja Resorts World, Pahang [2006] 1 MLJ
206, the Court of Appeal was in total agreement with the learned High Court judge in Han
Chiang School that the facts of the appellant case did not fit into the principle laid down
therein. The facts were clearly distinguishable. There was an ulterior motive behind the fixed
term contract in Han Chiang High School case which was absent in the contract entered into
between the appellant and the first respondent. The Court of Appeal agreed with the second
respondent and the learned High Court judge that the contract in the present case was a
genuine fixed term contract terminable upon the expiry of the fixed term agreed upon. On the
facts, neither the second respondent nor the learned High Court judge, in particular, had
committed any error in arriving at the decision
Termination based on Poor Performance
Poor performance refers to the inability of the employee to perform his job properly. The
inability to perform takes place when the employee is not able to perform the tasks that he is
assigned to. (Lecturer: teaching, publication & research, if lecturer just do one, the marks will
be reflected on their key performance indicator, understanding KPI will help the lecturer to
plan their whole entire year) An allegation of poor performance must always be substantiated
with evidence by the employer. If the employer decided to terminate the contract on poor
performance, the employer must establish:
i. That the workman was warned about his poor performance.
ii. That the workman was accorded sufficient opportunity to improve his performance.
- Must give reasonable time
- Assist the person (not enough training – send for training); (not motivated –
motivate him); (no mentor – appoint a mentor)
iii. That the workman failed to sufficiently improve his performance.
These principles were held in the case of Amsteel Mills Sdn Bhd v Koh Cheng Siew [1997]
1ILR 216, which was followed by the cases of Tan Cheng Leng v Tropicana Medical Centre
(M) Sdn Bhd [2017] 1ILR 383 and Tan Thean Imm v Al Rajhi Banking & Investment
Corporation (Malaysia) Bhd [2015] 2 LNS 0103
Termination due to Redundancy
S12(3)(a) – (f) of the Employment Act 1955 provides the circumstances that forced the
company to reduce its manpower.
s. 12(3) states that notwithstanding anything contained in subsection (2), where the
termination of service of the employee is attributable wholly or mainly to the fact that -
(a) the employer has ceased or intends to cease to carry on the business for the purposes
of which the employee was employed.
(b) the employer has ceased or intends to cease to carry on the business in the place at
which the employee was contracted to work.
(c) the requirements of that business for the employee to carry out work of a particular
kind have ceased or diminished or are expected to cease or diminish.
(d) the requirements of that business for the employee to carry out work of a particular
kind in the place at which he was contracted to work have ceased or diminished or are
expected to cease or diminish.
(e) the employee has refused to accept his transfer to any other place of employment,
unless his contract of service requires him to accept such transfer; or
(f) a change has occurred in the ownership of the business for the purpose of which an
employee is employed or of a part of such business, regardless of whether the change
occurs by virtue of a sale or other disposition or by operation of law.
the employee shall be entitled to, and the employer shall give to the employee, notice of
termination of service, and the length of such notice shall be not less than that provided under
subsection (2) (a), (b) or (c), as the case may be, regardless of anything to the contrary
contained in the contract of service.
S60J of Employment Act 1955 provides for the minister to enact regulation and for this
purpose, the regulation is the Employment (Termination and Lay off Benefits) 1980.
4 Important Principles for a valid redundancy (termination is done because there is more
employee as compared to the needs of the organisation)
1. That there is an oversize of workers for a fact. Cannot be just on paper, must show it
is as of facts.
2. Section 60N of the Employment Act 1955 requires the employer to terminate the
foreign workers first. Incorporated in due to the economic crisis in 2008 – 2009,
whereby most of the employer had decided to terminate most of the local workers and
retain the foreign workers on the basis that the salary of the foreign workers was
cheaper as compared to the local worker. So, the DG of labour received a lot of
complains which made them incorporate S. 60N.
3. The principle of Last in First Out (LIFO) must be fulfilled. This is where seniority
matters. If the employer is going to let go his employees, the seniority matters. The
junior you are in joining the company, you will be the first one out. Reduce clerk,
company has to take every clerk from the branches and look at the junior and from
 they will terminate unless the employer can show that the skill of this junior employee
is crucial to the company. If this is shown it is fine to not follow this principle.
4. The termination was done in good faith
Tuan Syed Hashim bin Tuan Long v Esso Prodution Malaysia Inc [1998] 5 MLJ 535
William Jack & Co (M) Sdn Bhd v S. Balasingam [1997] 3 CLJ 235
If the employer does not want to be bound by these principles, they will offer the employee
the mutual separation scheme or voluntary separation scheme. (Consent of both parties
needed)
Regulation 6 of the Regulation 1980 states the amount of payment for redundancy benefits-
based the length of your service. 10 days of wages per 1 year of service - 30 days wages
Employment Insurance System Act 2017
The Act sets out provisions to provide certain benefits and a re-employment placement
programme for insured persons in the event of loss of employment which will promote active
labour market policies. The Act applies to all industries having one or more employees who
are Malaysian citizens or permanent residents in Malaysia, including full-time or part time
workers excluding the public servants, domestic servants or self-employed. The employer
must insure the employees with Socso, the regulatory body for this Act.
All employees shall be registered and insured by their employers irrespective of their wages.
The contribution payable in respect of each employee shall be shared equally among the
employer and employee at the rate specified in Part I of the Second Schedule. RM4,000 per
month
Benefits
An insured person who considers that he or she has been laid off shall submit an application
of claim for benefits to SOSCO within 60 days from the date of the loss of employment,
subject to the qualification set out by Socso especially on contributions. What are the
benefits:
1. Job Search Allowance – certain amt of money is given to him to assist him to find a
job
Job search allowance means a monthly payment for a period of three to six consecutive
months to assist an insured person who has lost employment during the period of seeking
employment. SOCSO should pay to the insured person at the rate on a monthly basis as
specified in the Third Schedule:
 80% of the assumed monthly wages for the first month.
 50% of the assumed monthly wages for the second month.
 40% of the assumed monthly wages for the third and fourth month; and
 30% of the assumed monthly wages for the fifth and sixth month.

2. Early Re-Employment Allowance – incentive so that the employees will be able to

work
Early re-employment allowance means an incentive paid in lump sum to an insured person
for accepting an offer of employment from any employers and commencing the employment
within the waiting period or the period of receiving job search allowance at the rate as
specified in the Third Schedule.
3. Reduced Income Allowance – circumstances employees working in 2 jobs and lost 1,
the reduce income allowance will be used to top up the loss job
Reduced income allowance means a lump sum payment to assist the insured person who has
two or more employments and has lost one or more of the employments
4. Training allowance and training fee
Insured person who has lost an employment may apply to SOCSO to attend any training
provided by a training provider approved by SOCSO during the period the insured person
receives the job search allowance.
5. Re-Employment Placement Programme
Re-employment placement programme means a programme managed by SOCSO for insured
person for the purposes of re-employment. The Act requires insured person to commence
participation in the re-employment programme within the waiting period.
Termination due to Change of Ownership of Business
For example: Digi x celcom merging
S12(3)(f) of the Employment Act 1955 provides the ground for termination due to change of
ownership.
Regulation 8 (1) of the 1980 Regulations provides that: When a change occurs (virtue of
sale/other disposition/operation of law) in ownership, employee not entitled termination
benefits under Regulations if within 7 days of change, new owner offers to continue to
employ under terms and conditions not less favourable than those [terms and conditions]
before the change AND employee unreasonably refuses the offer. (If employee refuses, won’t
get compensation; if employee refuses with reasonable reasons, will get; if he did not get any
offer, then he will get compensation)
Regulation 8 (2) of the 1980 Regulations provides that if new owner does not offer to
continue employing as per para (1), contract of service of employee deemed to be terminated
and consequently, ex employer shall be liable for payment of all benefits.
Regulation 8 (3) of the 1980 Regulations provides that where an offer by new owner is
accepted, the term of his/her employment continues as if there was no break.
Associated Motor Industries v Thangavelu Originating Motion No: 44 of 1982, the Appellant
limited company in the business of assembling motor vehicles at Shah Alam, had all its
shares owned initially by Wearne Brothers. Wearne sold out to the Ford Motor Company.
Thangaraju contended that the takeover amounted to a change of ownership of the business
and Abdul Razak J. agreed.
Abdul Aziz & 87 Ors v Ladang Rengo Malay Estate S/B [1986] 2 MLJ 98 (SC), this case
concerned the proper application of Regulation 8 of the 1980 Regulations. All the
shareholders of the respondent company by a written agreement had sold and transferred their
entire shares to a 3rd party in 1981. The main asset of the company was rubber estate and oil
palm – which did not change. The employees pleaded for compensation for termination
benefits by the old employer based on the reason that the ownership had changed when the
shares were sold to a 3rd party. Initiated under section 69 of EA 1955 for termination benefits
under Regulation 8. Whether the estate was sold and if so, whether a change of employer
took place. The court held that an incorporated company is a legal person separate and
distinct from the shareholders of the company. - In the present case, there was no change in
the constitution of the company; no change in identity or personality – continued to own all
assets of the estate which were an integral part of the business for the purposes for which the
applicants were employed.
Must be more than mere selling of shares.
Termination for special reasons/misconduct
S. 14 (1) of EA states that an employer may, on the grounds of misconduct inconsistent with
the fulfilment of the express or implied conditions of his service, after due inquiry (a) dismiss
without notice the employee; (b) downgrade the employee; or (c) impose any other lesser
punishment as he deems just and fit, and where a punishment of suspension without wages is
imposed, it shall not exceed a period of two weeks.
Section 14 of EA makes it compulsory for those who fall within the ambit of the employment
act to be given the pre dismissal right to be heard. That means before an employer can
dismiss an employee for a misconduct, the employer must give the employee the right to be
heard.
Section 14-ground of misconduct
- any conduct that is contrary to the terms and conditions of the contract
- up to the employer to decide the list of conducts that fall within the ambit of
misconduct.
- The list will be divided into -serious-dismissal, not so serious-downgrade or
warning. For example-insubordinations, intoxication, dishonest conduct/cheating,
theft, fighting, poor performance, sexual harassment
Misconduct is a conduct that is inconsistent with the terms and conditions of the contract. of
Liew Ken & Ors v Malayan Thung Pan Bhd I.C. Award 38/1994 held that misconducts are
acts that go against the company rules. Usually, the company will categories the misconducts
into three, subject to the nature of the jobs which are light: warning, medium: punishment is
demotion or serious: instant termination such as dishonesty and insubordination.
Due inquiry
Milan Auto S/B v Wong Seh Yen [1994] 2 MLJ 135, the employer dismissed the employee
on the ground of misconduct without holding a domestic inquiry. Since the wages of the
employee is RM600 per month, the employee falls within the meaning of employee under the
Employment Act. The court held that under S 14 (1), it is mandatory for the employer to hold
a domestic inquiry before the dismissal of the employee. Termination without holding a
domestic inquiry will render the termination unlawful.
Bauer (M) S/B v Appalanial Vangenanda Saunaby [1994] ILR 145, the court also held that
S.14 of EA is mandated due inquiry before termination
Section 14(1) An employer may-the question is whether holding a due inquiry is compulsory.
Bauer (M) Sdn Bhd v Applanial Vagenanda Saunaby [1994] ILR 145 and Saik
Dharmalingam bin Abdullah v Malaya Breweries (Malaya) Sdn Bhd [1997] 1 MLJ 352
Whether due inquiry is mandatory for those who are not within the Employment Act 1955
Dreamland Corporation-where the court held that the failure to conduct domestic inquiry is
curable when the Industrial Court heard the case on the reference from the Minister /DG for
IR under section 20(3) of the IRA. So, because of this, the employer whose employee are not
govern by the EA has a choice whether to conduct a domestic inquiry.
Dreamland Corporation S/B v Choong Chiu Sooi [1988] 1 MLJ 111, the employee was
dismissed as a project manager who received monthly salary of RM2400. He argued that his
dismissal was against the principle of natural justice as there was no domestic inquiry held by
the employer. The court held failure to hold an inquiry was an irregularity not fatal to the
employer’s case. The workmen were lawfully dismissed. In this case, since the wages of the
employee was RM2400, he was not an employee within the meaning of Employment Act and
hence there is no statutory requirement for holding inquiry before dismissal. The principle in
Dreamland only applies when the person is not an employee under the Act.
When there is a misconduct, the complainant will lodge a complaint and then an preliminary
investigation will be conducted to find out whether there is a prima facie case, if there is
evidence found, there will be show cause letter. Then the employee must explain the
justifications, if the employer is satisfied with the discussion, the whole inquiry stops.
However, if the employer is not happy, they will issue a letter of suspension, this is to allow
the employer to gather more evidence. Then a charge is formulated, and this charge will be
given to the preparators regarding his charges, date, the regulations he breached and
alongside the charges a letter of domestic inquiry will be given as to when the domestic
inquiry will be conducted. The domestic inquiry will be held, a panel of inquiry will be
appointed, a decision will be made, the employee will be given the right to mitigate, the
committee will recommend the punishment and the punishment given must be
appropriate/proportionate to the misconduct.
2 principles need to be upheld
1. Right to be heard – giving of show cause letter, charges, to know the allegation so that
he can prepare for defence (the period for charges and domestic inquiry must be
reasonable) also include presence during the testimony of the witnesses, right to cross
examine the witnesses, right to mitigate
In the case of Luster Industries Sdn Bhd v Hassan bin Ahmad i.c. Award 263/1993, the court
held that the inquiry was very improperly done and regarded it as camouflage to get rid of the
Claimant. No show cause letter was given to the Claimant, no reasonable time was given to
the Claimant to prepare his defence and top of all these, the Inquiry was chaired by a person
who already knew of the incident, the claimant was not present when the witnesses were
questioned, and the claimant was not allowed to ask any question at the inquiry.
 2. Right against bias – panel for the domestic inquiry must be those who were not
involved in the investigation or prosecution. The panel must be partial
In the case of Skypak International Sdn Bhd v Foong Kah Tiu I.C. Award 161/1987, the
principles of natural justice in the context of an industrial disciplinary inquiry are when the
workman whose conduct or misconduct is being inquired into must have a reasonable notice
of the case he has to meet. He must have reasonable opportunity of being heard in his own
defence according to the maxim ‘audi partem alteram’, and this includes inter alia the
opportunity to face and challenge his accusers, witnesses, and whatever evidence there is
against him. Adding on, the hearing must be an impartial tribunal, i.e., a person who is
neither directly nor indirectly the party to the case: ‘nemo debet judex in propia cause’ which
means that no man shall sit in judgment in his own cause or that in which he has an interest.
The employee who is dismissed for misconduct can lodged a complaint to the DG of Labour
under section 69(3) of the Employment Act 1955. The remedy is wages in lieu of notice.