Retrosis HR
Rock n Rolla HR Management! | by Manesah Bakar

Termination Simpliciter: Does It Really Exist?

Not in Malaysia it doesn’t.

Termination Simpliciter refers to the absolute right of an employer to terminate the employee by virtue of the termination clause contained in most employment contracts.

Typically employment contracts contain the clause which says “either party may terminate this contract by giving xxx months’ notice or pay xxx months’ salary in lieu.”  Under Malaysian labour laws, such a contractual provision does not give the employer the absolute right to fire his employee. Although Malaysian law recognises the freedom of contract, in industrial relations, that freedom needs to be deferential to the rules of natural justice.

In the case of Assunta Hospital v Dr A. Dutt (1981)  1 MLJ 304, the Federal Court cited the case of R.B. Diwan Badri Dass & Ors v Industrial Tribunal, Punjab, Patiala & Ors:-

The doctrine of the absolute freedom of contract has to yield to the higher claims for social justice…the right to dismiss an employee is also controlled subject to well-recognised limits in order to guarantee security of tenure to an…employee..

The “well-recognised limits”, statutorily, are S. 20 of the Industrial Relations Act 1967 and S.14 of the Employment Act 1955.

S. 20 (1) states that:-

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 representations may be filed at the office of the Director General nearest to the place of employment from which the workman was dismissed.

The operative phrase is “dismissed without just cause or excuse by his employer”. The onus is on the employer to prove on the balance of probabilities that in order to have arrived at the decision to sack the employee there was a reason and that reason was justified in every sense.

In order to determine whether the reason for terminating the employee was indeed justified, we have to look at S. 14 (1) Employment Act 1955 which governs 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.

Even here, dismissal is only one option out of three.

But the crux of this section is the phrase “due inquiry”. It means that, in the first place, there must be a basis for the dismissal, and then a proper and correct, impartial and bona fide (i.e. “due”) investigation (i.e. “inquiry”) must be conducted on that basis before an employer can even think about terminating his employee.

And if you think carefully, there needs to a breach of contract by the employee ab initio, before any basis for inquiry can actually exist, isn’t it.

In the Dr. A. Dutt case, the Court held that termination by contractual notice and for no reason would be a dismissal without just cause and excuse and the Industrial Court may award reinstatement or compensation in lieu of reinstatement.

In the case of U.N. Dutt & Company Pte Ltd v Its Workmen, A.I.R 1963 (S.C.) 411, the learned judge held that an employer cannot base his right to discharge an employee purely on contract and he cannot be allowed to say that under the contract he has an unfettered right to hire and fire his employees.

In Darat Publications Sdn Bhd v Jason Quah (Award No 79 of 1988), the Court held that

…there is no termination simpliciter, but the employer must show and satisfy the Court that there was just cause and excuse to terminate the employee.

Based on this case, not only must the employer prove to the Court that the dismissal fulfilled both S.20(1) Industrial Relations Act 1967 and S.14(1) Employment Act 1955, but he must also do that TO THE SATISFACTION OF THE COURT.

And that is a very subjective thing indeed.

The Industrial Court, by the way, have a sharp sense of smell. There have been cases where it smelled a rat miles away when employers try to mask their malicious aforethought in sacking someone. Because winning termination simpliciter arguments with the Court takes Herculean effort, employers are better off not being Machiavellian in the first place.

Note, however, that EMPLOYEES may apply the contractual termination clause arbitrarily. An employee does not need any “approval” from his employer with regards to his termination of contract: once he has given his notice of resignation, whether his employer accepts his resignation or otherwise is immaterial. On the same token an employee can step up to his employer, pay up his notice equivalent in cash, and walk away. And his employer cannot stop him because he has lived up to his contractual end of the bargain.

Termination simpliciter cases often arise when a square peg employee cannot be made to fit into a round hole in the Company, in any aspect. Employers therefore need to use their judgment wisely when selecting and hiring employees. Time spent in doing some due diligence (background and reference checks on potential candidates), skillful interviewing techniques and psychometric or predictive index testing may seem cumbersome especially when a position needs to be urgently filled. But in the long run it will save a lot of hassles, costs, emotional wrangling and obviously litigatious predicaments of realising that you had chosen the wrong candidate and he doesn’t fit into your plans.

Employees can breathe easy that our laws provide comprehensive protection for workers, at least in terms of safeguarding our job security from unscrupulous employers. Obviously we are not talking about retrenchment scenarios or termination of employment brought about by extrinsic factors; but even in those cases local legislative provisions and policies do provide some cushion for the impact.

Being asked or made to leave a job has deep-setting consequences for any employee. It affects a person’s good name and reputation besides putting him and his family into unimaginable difficulties. This is why termination simpliciter is void in the eyes of the law.

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