Ensuring Fair Process: How to Conduct Lawful Domestic Inquiries in Malaysia

As EuroCham Malaysia’s exclusive Legal Knowledge Partner for Malaysia, Aqran Vijandran provides weekly legal insights tailored for EuroCham members. This article was prepared in that capacity by Dr. Harald Sippel (admitted in Austria, European Union) and Raja Nadhil Aqran (Managing Partner).

When dealing with employee misconduct, every employer must balance two key principles - maintaining discipline within the organisation and ensuring fairness in the process. In Malaysia, this balance is achieved through the Domestic Inquiry (“DI”), a procedural safeguard that allows employers to determine whether an allegation of misconduct is proven before disciplinary action is taken.

For European employers operating in Malaysia, understanding and properly conducting a DI is not just a matter of good HR governance - it is a legal requirement that directly affects the validity of any subsequent dismissal.

What Is a Domestic Inquiry?

A Domestic Inquiry is an internal process carried out by an employer to investigate allegations of misconduct against an employee. It is grounded in the principles of natural justice - namely, that every employee should have the right to be heard and that no one should be a judge in their own cause.

Although not expressly defined in legislation, DIs are recognised and enforced under Malaysian industrial jurisprudence through the Industrial Relations Act 1967 and various decisions of the Industrial Court. The failure to conduct a proper DI can render a dismissal procedurally unfair - even if the misconduct itself is proven.

A Step-by-Step Guide to Conducting a Proper Domestic Inquiry

1. Issue a Clear Show-Cause Letter
   Begin by notifying the employee in writing of the specific allegations, supported by facts and dates. The letter should invite the employee to explain why disciplinary action should not be taken.
2. Allow a Reasonable Period to Respond
   Employees must be given sufficient time — typically between three to seven working days — to prepare a written explanation. Rushed timelines can be viewed as a denial of the right to be heard.
3. Appoint an Impartial Panel
   The inquiry panel should consist of individuals not directly involved in the alleged misconduct. Impartiality is key: a biased or conflicted panel undermines the entire process.
4. Conduct the Inquiry Fairly
   The employee must be allowed to attend the inquiry, question witnesses, and present their own evidence. Proceedings should be conducted in a structured, professional manner, preferably with minutes taken by a recording officer.
5. Evaluate Evidence Objectively
   The panel’s findings must be based on the evidence presented — not on prior assumptions or management preference. Where doubt exists, it should be resolved in favour of the employee.
6. Communicate the Outcome in Writing
   After deliberation, issue a written finding stating whether the allegation has been proven. If disciplinary action is warranted, it must be proportionate to the offence (for example, a warning, suspension, or dismissal).

Common Pitfalls to Avoid

• Predetermined outcomes: conducting an inquiry merely to “tick the box” undermines its purpose.
• Poor documentation: failing to keep written records or minutes can make it difficult to defend a decision later.
• Skipping the process: summary dismissal without a DI, except in very limited cases of gross misconduct, is risky and often deemed unlawful.

Practical Takeaways for European Employers in Malaysia

• Ensure that internal disciplinary policies and employment contracts reflect Malaysian procedural requirements.
• Maintain neutrality and proper documentation throughout the process.
• Seek legal advice before initiating a DI or issuing dismissal letters - corrective steps after the fact are often too late.

By conducting a fair and transparent Domestic Inquiry, employers not only safeguard themselves against unfair dismissal claims but also demonstrate their commitment to ethical and compliant business practices in Malaysia.