Employee Misconduct in Malaysia: Navigating Lawful Dismissals and Conducting Proper Domestic Inquiries

Introduction

Effectively managing employee misconduct is one of the most critical and sensitive responsibilities for employers in Malaysia. Misconduct cases, if handled improperly, can lead to significant financial liabilities, legal disputes, reputational damage, and disruption to workplace harmony. Given these implications, it is crucial for employers to understand clearly what constitutes misconduct, the importance of conducting a "due inquiry" or domestic inquiry, and the best practices for managing such processes. This article provides comprehensive guidance on these issues, including lessons from key Industrial Court decisions, to help employers navigate employee dismissals lawfully and confidently.

What Constitutes Misconduct Under Malaysian Law?

While the Employment Act 1955 ("EA") does not explicitly define misconduct, judicial interpretations provide valuable guidance. In the landmark case Plaat Rubber Sdn Bhd v Goh Chok Guan (Award 30 of 1995), misconduct is defined as:

"Actions that adversely affect an employee's duties and responsibilities, significantly impacting the trust essential to the employment relationship."

Examples of common misconduct include:

• Insubordination or disobedience.
• Dishonesty, fraud, theft, or embezzlement.
• Persistent lateness or absenteeism.
• Negligence and dereliction of duty.
• Threats, harassment, or violence toward colleagues or superiors.

Conducting a "Due Inquiry": A Step-by-Step Guide

Section 14(1) of the EA requires employers to conduct a "due inquiry" prior to dismissal for misconduct. While often equated with a formal "domestic inquiry," a "due inquiry" does not always necessitate a formal inquiry. However, many employers prefer the structured approach of a formal domestic inquiry for greater transparency and fairness.

A comprehensive "due inquiry" process typically includes:

1. Preliminary Investigation

• Assess the seriousness and reliability of the allegations.
• Appoint a competent investigating officer (IO).
• Gather relevant evidence thoroughly.

2. Issuing a Show Cause Letter

• Clearly outline specific allegations.
• Allow sufficient time for response (usually 5-7 working days).
• Explain consequences for failure to respond.

3. Evaluating the Employee’s Response

• Carefully review the response provided.
• Decide if further formal inquiry or disciplinary hearing is needed.

4. Conducting a Domestic Inquiry (if necessary)

• Notify the employee of specific charges clearly and in writing.
• Allow adequate time for preparation, generally at least 7 days from notice.
• Convene a neutral panel.
• Allow the employee representation if requested.

5. Decision and Communication

• Document findings and decisions clearly.
• Communicate the outcomes promptly.
• Provide information about the right to appeal.

Categories of Misconduct and Practical Examples

Misconduct typically falls into two categories:

• Minor Misconduct: Occasional tardiness or minor procedural breaches.
• Major Misconduct: Theft, fraud, assault, or gross negligence.

Employers must ensure disciplinary actions correspond proportionately to the severity of misconduct.

Learning from Precedents: Key Industrial Court Decisions

Lesson 1: Importance of Thorough Documentation

‍The case IE Project v Tan Lee Seng highlights the crucial role of proper documentation. Lack of documented warnings or evidence led to the dismissal being unfair. Employers must maintain detailed records of warnings and disciplinary processes to strengthen their position.

Lesson 2: Fair Procedure is Essential

Kedah Marble Sdn Bhd v Jaafar Mohamed underscores the necessity of a transparent and fair inquiry process. Employers must demonstrate they provided clear warnings and adequate opportunities for improvement.

Lesson 3: Precision in Allegations

‍As seen in Esso Production Malaysia Incorporated v Yusop Nordin, unclear allegations can undermine the legitimacy of dismissals. Precise documentation strengthens employer credibility during disputes.

When to Conduct a Domestic Inquiry

A domestic inquiry, although not always mandatory, is highly advisable in situations involving serious or complex allegations. Factors influencing this decision include:

• The nature and gravity of the alleged offence (e.g., financial fraud or theft often warrant formal inquiry).
• Availability and sufficiency of evidence (a clear admission of guilt may render a formal inquiry unnecessary).
• The presence of conflicting testimonies requiring formal adjudication.
• The potential legal implications and reputational risks involved.

There is no fixed rule, and the decision should consider a combination of these factors based on specific circumstances.

How to Conduct a Domestic Inquiry Effectively

Conducting a robust domestic inquiry involves several critical steps:

1. Establish an Impartial Inquiry Panel

• While complete impartiality within an organization can be challenging, employers must strive to appoint unbiased individuals.
• Best practices include involving external, qualified personnel, such as legally trained individuals, to ensure objectivity.
• Clearly document panel appointments to demonstrate fairness.

2. Provide Clear Notification and Adequate Preparation Time

• Typically, a minimum of 7 days' notice is considered sufficient to allow the accused employee to prepare.
• Notification must detail charges clearly and precisely.

3. ‍Allow Representation for the Employee

• Allowing employee representation (internal representative or external counsel) is advisable but not mandatory.
• Representation helps demonstrate fairness and ensures employees adequately defend themselves, reducing disputes over procedural fairness.

4. ‍Adhere to Principles of Natural Justice

• Employees must have the right to know accusations, respond adequately, and present evidence.
• The inquiry must be conducted without bias and with due fairness.

5. Maintain Comprehensive Records of Proceedings

• Detailed records ensure transparency and accountability.
• They provide essential evidence during potential legal proceedings, strengthening the employer’s case.

6. ‍Consequences of Improper Inquiry

• Failing to conduct a proper domestic inquiry can severely weaken the employer’s position in legal proceedings.
• The Industrial Court may find dismissal procedurally unfair, potentially resulting in compensation awards, orders for reinstatement, or both.

Conclusion

Properly managing employee misconduct through lawful dismissals is essential for maintaining workplace integrity and compliance with Malaysian employment laws. A robust understanding of what constitutes misconduct, effective implementation of a structured "due inquiry" or domestic inquiry, and adherence to best practices can significantly reduce legal risks. Employers must remain diligent, ensuring fairness and transparency throughout disciplinary processes. By doing so, they foster a fair, compliant workplace culture that not only minimizes legal repercussions but also promotes trust and productivity among employees.

This article is forgeneral information only and does not constitute legal advice. For more information, contact us at info@aqranvijandran.com

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