Understanding the Scope and Objectives of Part IV
Part IV of the Employment Act 2025 (the Act) serves as a comprehensive framework governing termination of employment contracts in Malaysia. It aims to provide a fair and equitable process for both employers and employees, balancing the needs of businesses with the rights of workers.
Key Provisions of Part IV
Part IV encompasses several key provisions that define the legal grounds for termination, procedures for dismissal, and remedies for wrongful termination.
Grounds for Termination
The Act specifies the following grounds for termination of employment:
| Grounds for Termination | |
|---|---|
| Misconduct by the employee | |
| Incapability or unsatisfactory performance | |
| Redundancy | |
| Retirement | |
| Statutory provisions or court orders |
Procedures for Dismissal
Employers must adhere to the following procedures when terminating an employee:
- Provide notice: The employer must provide the employee with reasonable notice of termination, as specified in the Act or the employment contract.
- Furnish reasons: The employer must provide the employee with written reasons for termination.
- Allow for representation: The employee has the right to be represented by a trade union representative or a legal practitioner during the dismissal process.
- Consider employee’s response: The employer must consider the employee’s response to the reasons for termination before making a final decision.
Remedies for Wrongful Termination
If an employee believes that they have been wrongfully terminated, they may seek legal remedies, including:
- Remedies for unfair dismissal: Reinstatement, re-engagement, or financial compensation.
- Damages for breach of contract: Compensation for any losses incurred as a result of the breach of employment contract.
Part IV vs. Common Law Principles
Prior to the enactment of the Employment Act 2025, the common law principles of employment termination governed employment relationships in Malaysia. However, Part IV of the Act introduced significant changes and modifications to these principles:
Expanded Grounds for Termination
The Act provides a more comprehensive list of grounds for termination compared to common law, including redundancy and statutory provisions.
Procedural Fairness
The Act emphasizes procedural fairness in dismissal procedures, requiring employers to provide notice, furnish reasons, and consider the employee’s response.
Remedies for Wrongful Termination
Part IV introduces specific remedies for wrongful termination, such as reinstatement and re-engagement, which were not available under common law.
Common Mistakes to Avoid in Applying Part IV
Employers and employees should be aware of the following common mistakes to avoid when applying Part IV of the Employment Act 2025:
Lack of Proper Notice
Failure to provide adequate notice of termination can lead to claims for wrongful dismissal.
Insufficient Reasons
The reasons for termination must be specific, valid, and supported by evidence.
Biased Decision-Making
Employers must avoid making arbitrary or discriminatory decisions when terminating an employee.
Unfair Procedures
Employers must ensure that the dismissal process is fair and transparent, allowing the employee to fully participate.
Inadequate Remedies
Failing to provide appropriate remedies for wrongful termination can result in additional legal liability.
Case Details: Illustrating Part IV in Practice
Case 1:
Employer: XYZ Company
Employee: John Smith
Grounds for Termination: Misconduct
John Smith was dismissed by XYZ Company for misusing company property. However, the Industrial Court found that the employer did not provide sufficient evidence of the employee’s misconduct and ordered the company to reinstate Smith with full back pay.
Case 2:
Employer: ABC Company
Employee: Mary Tan
Grounds for Termination: Redundancy
ABC Company terminated Mary Tan due to a downsizing of the workforce. The Industrial Court upheld the termination, finding that the company had followed proper procedures and provided Tan with a fair redundancy package.
Conclusion
Part IV of the Employment Act 2025 provides a comprehensive framework for termination of employment in Malaysia, balancing the interests of both employers and employees. By understanding the key provisions, procedures, and remedies outlined in Part IV, employers and employees can mitigate legal risks and ensure fair and equitable treatment during the termination process.
