Dismissal, Termination, and Retrenchment in Employment Law

Vocabulary flashcards covering the principles, statutes, remedies, and procedures surrounding dismissal, termination, misconduct, domestic inquiries, constructive dismissal, lay-off, and retrenchment under Malaysian labour law.

Dismissal

The act of terminating the employment of an employee by an employer unilaterally, commonly referred to as being fired, terminated, or sacked.

Breach of Employment Contract (Section 15)

A condition under Section 15 of the Employment Act 1955 where a contract is deemed broken if the employer fails to pay wages, or if the employee is absent continuously for more than $2$ consecutive working days without prior leave, reasonable excuse, or timely notification.

Automatic Termination

A form of termination under Section 11 of the Employment Act 1955 where the contract ends automatically once the specified contract period expires or the specified piece of work is completely performed.

Notice of Termination (Section 12(2))

A written notice stating the notice period and last date of service, which by default requires $4$ weeks for service under $2$ years, $6$ weeks for service between $2$ and $5$ years, and $8$ weeks for service over $5$ years.

Statutory Notice of Termination (Section 12(3))

Mandatory notice required from an employer of not less than the statutory period in events of cessation of business, redundancy, refusal to accept a non-contractual transfer, or change of business ownership.

Salary in Lieu of Notice

A payment provided under Section 13(1) of the Employment Act 1955 allowing either party to terminate the contract immediately without serving notice by paying wages equivalent to the statutory or contractual notice period.

Doctrine of Election

A legal principle illustrated in Eastern Mining Metals Co Sdn Bhd v M.M Ismail & Ors stating that when an employee is given a choice between two termination options, selecting one prevents them from later claiming the alternative or challenging that choice.

Misconduct

Wrongful acts or behaviour committed by an individual in connection with their employment, such as theft, sexual harassment, safety violations, or falsifying documents.

Domestic Inquiry

An internal fact-finding due inquiry procedure conducted by an employer under Section 14 of the Employment Act 1955 to investigate alleged misconduct before taking disciplinary action, adhering to the principles of natural justice.

Suspension under Section 14(2)

A temporary suspension an employer may impose upon receiving misconduct complaints, lasting not more than $2$ weeks on half pay, which must convert to full pay if the inquiry is not completed within that time.

Unfair Dismissal

A dismissal deemed improper or unlawful by the court, typically occurring when an employee is terminated without proper cause or without a valid domestic inquiry adhering to natural justice.

Reinstatement

An Industrial Court remedy that orders the employer to restore an unfairly dismissed employee back to their former position and terms of service.

Back Wages

A monetary remedy awarded to an unjustly dismissed employee to compensate for lost earnings, capped at up to $24$ months for permanent employees and $12$ months for probationers.

Damages

A court-calculated monetary compensation based on loss of earnings, case severity, and background facts, which can be pursued in civil courts for future earnings.

Special Reasons Termination (Section 14(3))

The right of an employee to terminate their contract without notice if they or their dependants are threatened by violence or disease not undertaken in their contract of service.

Constructive Dismissal

A situation where an employee is compelled to resign because the employer committed a fundamental breach of the employment contract (such as improper demotion, pay cuts, or unaddressed harassment), making it impossible to continue working.

Lay Off

A temporary suspension where work cannot be provided, defined under Regulation 5 when an employer fails to provide work for at least $12$ normal working days within a period of $4$ consecutive weeks to an employee whose pay depends on work provision.

Retrenchment

The permanent discharge or dismissal of employees from employment because their roles or positions have become redundant.

Lay-off and Retrenchment Benefits (Regulation 6)

Statutory compensation payable within $7$ days to eligible employees with over $12$ months of continuous service, calculated as $10$ days' wages per year of service for $1\text{ to }2$ years, $15$ days' wages per year for $2\text{ to }5$ years, and $20$ days' wages per year for $5$ or more years.

Code of Conduct for Industrial Harmony

A non-binding set of guidelines agreed upon by the Ministry of Human Resources and Malaysian Council of Employers' Organisations that courts consider to assess the fairness of retrenchment and workforce management practices.

Last In, First Out (LIFO)

A guideline principle under the Code of Conduct for Industrial Harmony where the retrenchment order is determined by length of service, meaning employees with the shortest service are retrenched first.

Borang PK

A mandatory notification form that an employer must submit to the nearest Department of Labour when executing retrenchments, failure of which incurs a fine up to $RM50{,}000$ under Section 99A of the Employment Act 1955.