Malaysia: Reinstatement Must be Sought by Employees in Unfair Dismissal Claims

A recent decision of the Industrial Court of Malaysia has confirmed the position that in a claim for unfair dismissal, the primary remedy is reinstatement. If an employee does not seek reinstatement, the court has no further jurisdiction over the matter.

Reinstatement as the primary remedy

Section 20 of the Industrial Relation Act 1967 of Malaysia sets out an employee's entitlement to challenge the termination of their employment as follows:

20. (1) 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 words 'to be reinstated' clearly indicate that the primary remedy in a claim for unfair dismissal is reinstatement ie that if successful, the employee should be given his job back and continue to work for the employer.

Can an employee seek damages instead of reinstatement?

It is not uncommon for employees to make a claim for reinstatement and, in the alternative, a claim for damages. Given the length of time it takes for claims to be heard in Malaysia, by the time the matter is adjudicated, often the role will no longer exist, or will already have been filled by another employee.

However, in a recent decision of the Industrial Court (28(7)/4-1255/16), the employee had no intention of being reinstated. She had found alternative employment, remunerated at a higher rate, and did not want to return to her former employer.

Yang Ariff Tuan Franklin Goonting referred to the earlier case of Holiday Inn Kuching v Elizabeth Lee Chai Siok (1992) 2 CLJ (Rep) 521 where it was held that:

"These grounds can be conveniently dealt with together. It is essentially on the issue of reinstatement. As stated by me earlier, the respondent in her representations initially wanted reinstatement which is in accordance with s20(1) of the IRA but subsequently in the hearing before the Industrial Court she changed her stand and instead asked for damages in lieu of reinstatement. In such a situation can the Industrial Court consider this aspect of her claim? In my view the respondent clearly could not come within the provisions of s20(1) and (3) of the IRA as the legislature intended that recourse to the Industrial Court is only in respect of reinstatement and once reinstatement is no longer applied for the Industrial Court ceases to have any more jurisdiction."

In relying on the Holiday Inn case YA Goonting noted that where an employee makes a claim for reinstatement without ever intending to take it up, "[i]f this is not an abuse of this Court's process, the Court is hard put to say what is".

No standalone damages claim

It is clear from these decisions, and a strict reading of s20 of the IRA that there is no standalone claim for damages in an unfair dismissal claim. The employee must seek, and be prepared to accept, reinstatement.

Key Takeaways

Although there will still be circumstances where the Court entertains a damages claim (for example, where the employer has ceased operations), the focus in unfair dismissal actions must be on reinstatement.

When legitimate challenges are made to a termination decision (ie where the dismissal was unfair), employers should therefore consider reinstatement of the employee where practicable. If an employer is able to show a court that they have made a previous offer to reinstate the employee which the employee rejected in favour of monetary damages, this will make it very difficult for the employee to subsequently seek reinstatement from the court.

Herbert Smith Freehills provided strategic advice and guidance on this matter, working with local counsel in Malaysia.