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Terminating without violating the law - Malaysia

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  • 1. Terminating Without Violating The Law Dr. Balakrishnan Muniapan bala.hrm@gmail.com 11.12.13
  • 2. OVERVIEW • The employment laws on termination & dismissal; • Types of termination of employment; • The application of the rules of natural justice in termination of employment; & • Proactive management of employment termination plus creating & sustaining a harmonious employment relationship.
  • 3. EMPLOYEE TERMINATION Voluntary Termination Termination initiated by employees, often due to resignation & retirement. Involuntary Termination Termination initiated by employers, often due to misconduct, absenteeism, poor performance, & other types of termination.
  • 4. EMPLOYMENT TERMINATION • One of the difficult task managerial task. • Results from poor selection & ineffective people management. • If termination is unavoidable, proper planning can help to avoid unfair dismissal claims & other related legal issues.
  • 5. THE EMPLOYMENT LAWS Industrial Relations Act 1967 Trade Unions Act 1959 Employment Act 1955 Sarawak Labour Ordinance Sabah Labour Ordinance Occupational Health and Safety Act 1994
  • 6. MANAGERIAL PREROGATIVES Industrial Relations Act 1967, Section 13(3) 1. 2. 3. 4. 5. 6. Employment; Assignment of work; Promotion; Transfer; Termination; & Dismissal
  • 7. TYPES OF TERMINATION 1. 2. 3. 4. 5. 6. 7. 8. 9. Retirement Resignation Breach of contract Frustration of contract Ending of a fixed term contract Non confirmation of a probationer Retrenchment Dismissal (misconduct & poor performance) Constructive dismissal
  • 8. INDUSTRIAL COURT STATISTICS (AWARDS OF TERMINATION CASES) TYPES OF TERMINATION 2005 2006 2007 2008 2009 2010 2011 2012 Constructive 22 42 97 126 140 135 91 96 Misconduct 2144 2051 1200 878 613 608 639 540 Retrenchment 16 32 422 155 114 67 90 62 Others 0 0 402 573 328 479 640 735 TOTAL 2182 2125 2121 1732 1195 1460 1433 1289
  • 9. TERMINATION: BURDEN OF PROOF In Stamford Executive Centre v. Puan Dharsini Ganesan (Award 263 of 1985) the Industrial Court observed: “In a dismissal case the employer must produce convincing evidence that the workman committed the offence or offence of the workman is alleged to have been committed for which he has been dismissed. ……. He must prove the workman guilty and it is not the workman who must prove himself not guilty. This is so basic a principle of industrial jurisprudence that no employer is expected to come to this Court in ignorance of it...”
  • 10. THE LAW ON UNFAIR DISMISSAL Section 20 (1) of the Industrial Relations Act, 1967 states:"Where a workman, irrespective of whether he is a member of a trade union of workmen or otherwise, considers that he has been dismissed without just cause or excuse by his employer, he may make representations in writing to the Director General to be reinstated in his former employment; the representation may be filed at the office of the Director General nearest to the place of employment from which the workman was dismissed."
  • 11. TERMINATION OF A PROBATIONER • The Industrial Court and the superior courts in Malaysia have over the years ruled that a probationer enjoys the same rights as a permanent employee. • As a result the services of a probationer cannot be terminated without just cause or excuse (Section 20, IRA 1967).
  • 12. TERMINATION OF A PROBATIONER • When the employer seeks to rely on unsatisfactory work performance or inefficiency or misconduct on the part of the probationer, the employer must adduce convincing evidence to justify them & not mere allegation. • Remember, the burden of proof lies on the employer.
  • 13. TERMINATION OF A PROBATIONER The grounds that will enable termination of probation are: • • • • unsatisfactory work performance misconduct reorganization of company retrenchment/redundancy a
  • 14. TERMINATING POOR PERFORMERS • Performance goals must be clear. • Competency development. • Warning on unsatisfactory work or incompetence. • Opportunity to improve performance such as training. • Finally, termination should be on proper grounds.
  • 15. DID THE COMPANY CONTRIBUTE TO THE POOR PERFORMANCE? The Industrial Court has clearly laid down the guidelines for dealing with incompetence in Ginder Singh Transport Co.Sdn. Bhd v Bijir Singh Juala Singh [1995] 1 ILR 516. “An employer ought in the first place to ascertain the cause for the employee’s poor performance. Some of the causes may be attributable to the company’s own weaknesses or inefficiencies in the system of its operations. The claimant may not have been given the right training or equipment to do the task assigned to him. He might not have been adequately instructed as to what was expected of him. If so, the employer should attend to the problem which is the source of the employee failing to perform, and the latter can be expected to get on with his work.”
  • 16. INCREMENTS FOR POOR PERFORMERS Increments granted to poor performers will also negate an employers contention the employee was a poor performer. In Davotek Sdn. Bhd. v How Kor Wei - Industrial Court Award 19 of 2000, the employee was given a salary increase in March and dismissed in April for poor performance. Until his dismissal the company had no complaint on the employee’s performance. The Industrial Court held the dismissal was without just cause or excuse and ordered reinstatement.
  • 17. TYPICAL PM PROCESS Strategic Plan Performance Objectives Employee Performance Plan Competency Development (Ongoing) Performance Monitoring (Ongoing) Performance Appraisal Provide feedback, coaching or counseling as needed Is Performance Improving? Additional feedback, coaching or counseling may be utilized No Implement performance improvement plans Has Performance Improved? Yes Recognize/reward performance, foster further development Performance managed (repeat performance cycle) Yes No Transfer/Demote/Terminate
  • 18. High Very Often Attitude & Motivation Deadwood ? Will Do, CANNOT Do Will Not Do, Cannot Do Will Do, Can Do Star Performers Will NOT Do, Can Do WATCH THESE ! Low Low Competency High How Suitable Are People For Their Assigned Jobs?
  • 19. FRUSTRATION OF CONTRACT • FRUSTRATE in the Oxford Dictionary has been explained to "prevent from progressing, succeeding or being fulfilled" while frustration means "being frustrated". • Frustration of contract can be defined as a prevention from continuation of a contract when the employee who is employed under the contract becomes unable to perform the work for which he was employed due to reasons beyond control by both parties (employer and employee).
  • 20. DOCTRINE OF FRUSTRATION • The employee concerned becomes incapable to perform duty due to an accident or prolonged illness; • The employee concerned was under police detention or custody for infinite period of time; and • The professional license for the employee concerned to practice a particular profession was revoked.
  • 21. TERMINATION FOR ABSENTEEISM Based on the EA 1955, Section 15(2), an employer can terminate an employee if: 1. He has been absent without permission for three or more days; and if, 2. He has no reasonable excuse; or 3. He has an excuse but has not informed or attempted to inform his employer of that excuse. However, the rules of natural justice must not be ignored.
  • 22. TERMINATING A FIXED TERM CONTRACT A fixed-term contract clearly states that the employee is to be recruited for a particular period of time. In common law, when a contract for fixed term expires, it terminates of itself: it has not been “terminated” by either party. In the conventional sense, there is neither dismissal nor resignation……The court finds that the employment of the 35 teachers are ordinary employments dressed up in form of fixed term contract…….. As such they……. within the law……… right to security of employment…. right not to be dismissed without just cause or excuse. Industrial Court in Han Chiang High School v National Union of Teachers in Independent Schools, 1988
  • 23. RETRENCHMENT • Retrenchment is a termination of the contract of employment due to redundancy or reorganization. • However, when the employer terminates the employment contract of an employee on some pretext other than the real reason like lawful trade union activity, it is called victimization. • The employer should comply with the principle of LIFO unless there are sound and valid reasons for departure.
  • 24. TERMINATION DUE TO MISCONDUCT “Misconduct is any conduct on the part of the employee inconsistent with the faithful discharge of his duties or any breach of the express or implied duties of an employee towards his employer would constitute an act of misconduct” (Industrial Court in Malayan Thung Pau Bhd v Four Workmen - IC Award 17/1974).
  • 25. MISCONDUCT IN EMPLOYMENT Misconduct (minor & major) can be broadly dealt under the three heading as follows: • misconduct relating to discipline • misconduct relating to duty • misconduct dealing with morality
  • 26. PROVING THE MISCONDUCT The employer has to prove the misconduct alleged against the employee. In Rasa Sayang Hotel and National Union of Hotel Bar & Restaurant Workers (Award 82 of 1982) the Industrial Court said: “The court agrees with the union that there is no denying the right of the employer to punish, but there is also the right of the employee not to be punished if there has been no offence. Before the hotel can show that the punishment does fit the crime, it must first prove the crime”.
  • 27. INVESTIGATING MISCONDUCT  Fact-finding  To find out if an offence has been committed & whether or not accused has a case to answer  Statements from witnesses  Relevant documents
  • 28. PREPARATION OF SHOW-CAUSE LETTER A charge letter addressed to an accused employee must be in writing & must have the following:1. 2. 3. 4. Must contain the allegation or allegations of the misconduct. Allegation or allegations must be simple, clear, accurate and precise so that the accused can know and understand them. Must state that the accused has to show-cause as to why disciplinary action should not be taken. A reasonable time-frame for the accused to show-cause. If accused does not show-cause within the stipulated timeframe or the excuse given is not accepted, appropriate disciplinary action will be taken.
  • 29. DOMESTIC INQUIRY “a formal hearing held by an employer before an employee is dismissed or before any other major penalty is imposed” Industrial Relations Act 1967 Section 13(3) states that the employers have the right to dismiss employees who commit misconduct. However, the right to dismiss is limited by two requirements: • Procedural Requirements - the employee must be treated fairly and justly. • Substantive requirements - the employee should not be punished without sufficient proof of his guilt.
  • 30. DOMESTIC INQUIRY Domestic Inquiry Is Required By:• Statute - Section Employment Act 1955 14(1) of the • Common Law - The rules of natural justice before an employee can be punished for an act of misconduct
  • 31. DUE INQUIRY IN DISMISSAL For employees governed by the Employment Act 1955, Section 14 of the Act states: “An employer may, on grounds of misconduct inconsistent with the fulfillment of the express or implied conditions of his service, after due inquirydismiss without notice the employee  downgrade the employee  impose any other lesser punishment as he deems just and fit.” 
  • 32. RULES OF NATURAL JUSTICE  ‘Hear from the other side’ - audi alteram partem: This means no man shall be condemned unheard, the accused must be given sufficient opportunity not only to know the case against him but also to answer it. He must have the opportunity to actually see, hear & question all witnesses one by one from whom statements were taken.  ‘No man shall judge for his own cause’ - nemo judex in causua sua: This means the person who sits in judgments must be an independent person who is neither the accuser nor the accused or any person who has any interest in or dislike of any parties involved or any bias in any respect. This is to ensure that the person who sits in judgments is able to act impartially & without bias.
  • 33. NATURAL JUSTICE “If the right to be heard is a real right which is worth anything, it must carry with it a right in the accused to know the case which is made against him. The accused must be given sufficient opportunity not only to know the case against him but also to answer it”. Lord Dennings in B Surinder Singh Kanda v Govt of the Federation of Malaya (1962)
  • 34. DISCIPLINARY ACTION In deciding the nature of disciplinary action to be meted out, consideration to be taken into account:1. the severity of the misconduct committed. 2. the extent to which the employee is responsible. 3. the circumstances under which the misconduct was committed. 4. the past record of the delinquent employee, including his length of service. 5. bad past record would be aggravating and good past record would be mitigating.
  • 35. REMEDY FOR DISMISSAL WITHOUT JUST CAUSE OR EXCUSE Whether a workman is a member of a trade union or not, he can file a representation to the DGIR in writing seeking for reinstatement to his former employment if he considers he was dismissed without just cause or excuse. To qualify for this remedy • must be workman • file representation within 60 days of the dismissal Upon receipt of the representation, DGIR will take steps as necessary or expedient for a settlement.
  • 36. SECTION 20, IRA 1967 “Section 20 of the IRA embodies the concept of security of tenure of employment…… a workman is entitled to keep his job & no employer may be allowed to throw a workman out of his employment without good reason. This provision gives a workman the right to claim reinstatement & this court may order reinstatement in the workman’s former employment if his dismissal is considered to be without just cause or excuse”. (Industrial Court in PG Pak Poy & Associates Sdn Bhd v Looi Sook Chan, 245/1986)
  • 37. CONSTRUCTIVE DISMISSAL “An employer does not like a workman. He does not want to dismiss him and face the consequences. He wants to ease the workman out of his organization……… Generally speaking he will make life so unbearable of the workman so as to drive the latter out of employment.” Dato’ Gopal Sri Ram, JCA in Quah Swee Khoon vs. Sime Darby Berhad (2000)
  • 38. UNFAIR DISSIMAL & CONSTRUCTIVE DISMISSAL Unfair Dismissal - the employer must prove a fair reason for dismissal. Constructive Dismissal the employee must prove that the dismissal was constructive.
  • 39. THE LANDMARK CASE The Supreme (now Federal) Court in Wong Chee Hong V. Cathay Organisation (M) Sdn. Bhd. [1988] 1 CLJ 298 Salleh Abbas LP stated the principle underlying the concept of constructive dismissal as follows: “The common law has always recognized the right of an employee to terminate his contract of service and therefore to consider himself as discharged from further obligations if the employer is guilty of such breach as affects the foundation of the contract or if the employer has evinced or shown an intention not to be bound by it any longer”.
  • 40. DISCUSSION Proactive measures in managing employment termination Creating & sustaining a harmonious employment relationship
  • 41. HRM – CUSTOMER – PROFIT CHAIN HRM Practices Satisfied Employees • Less turnover • Consistent service Customer’s Perceived Value • Satisfied customers • Customer referrals Higher Revenue Growth and Profits
  • 42. CONCLUSION Remember, Law is NOT a Substitute for Good Human Resource Management Practices! THANK YOU 
  • 43. DR. BALAKRISHNAN MUNIAPAN Dr. Balakrishnan Muniapan is a specialist in Human Resource Development and is currently with Wawasan Open University in Penang. He is recognized by scholars as a pioneer in the development and promotion of Vedic HRD approach in Malaysia. Dr Bala also takes the role of Visiting Professor in HRM for universities and business schools in Vietnam, Philippines and India. As a corporate trainer and consultant, he has conducted training and consulted for more than fifty organizations in Malaysia and in Asia. In academia, he has published over fifty research papers in international journals, conference proceedings and book chapters. A highly sought-after speaker in HRM, Dr Bala is frequently invited to speak on HRM issues at international conferences in countries in Asia, Australia, Africa and Europe. Prior to academia, he was in production management with a large Japanese MNC at his hometown in Sungai Petani, Kedah. Email: bala.hrm@gmail.com

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