Case Background & Strategy

You signed a fixed-term contract. You were told it would be reviewed at the end of the year.

That was seven years ago.

Since then, you have been promoted. Your salary has gone up. You manage a team. Every December, a new letter arrives — and you sign it without question, because this is simply how things work here.

Then one January, the letter says something different. Your services will be extended for one month. And then terminated.

Is that a dismissal? Or did your contract just expire?

The answer matters enormously. And it is not as straightforward as your employer may want you to believe.

The Label on Your Contract Is Not the Final Word

Malaysian law does not allow employers to simply point at a “fixed-term contract” clause and walk away. Under the Industrial Relations Act 1967, courts are required to look beyond the label — and ask whether the arrangement was genuinely fixed-term, or whether it was permanent employment dressed up in temporary clothing.

The Federal Court settled the test in Ahmad Zahri bin Mirza Abdul Hamid v AIMS Cyberjaya Sdn Bhd [2020]. Three things are examined:

What did both parties actually intend when the contract was signed?

Not just what the document says — but what the circumstances of your recruitment, the conduct of your employer, and the full history of the relationship reveal.

How were you treated during the employment?

Did your employer renew your contract automatically, without you ever having to ask? Were you promoted? Did your salary increase year on year? Were you given more annual leave, more responsibility, more integration into the organisation? If so, that matters.

What kind of work were you doing?

Project-based work, seasonal roles, or short-term specialist engagements can genuinely justify a fixed term. But if you were running a permanent department — finance, operations, HR, sales — that is a very different picture.

No single factor is conclusive. Courts look at the whole picture. And the whole picture often looks very different from the wording in the offer letter.

What the Courts Have Said — And What It Means for You

The clause that said “you are not deemed permanent” — and why it did not hold up

In Azrell bin Mohamad v National Aerospace & Defence Industries Sdn Bhd [2025], the High Court overturned an Industrial Court decision that had dismissed an employee’s claim based on exactly such a clause.

The employee had been re-engaged after a resignation gap, then renewed annually for seven consecutive years — without ever having to apply. He was promoted. His pay grew. His work was in the company’s finance department: not a project, not a season, but the permanent operational heartbeat of the business.

His contract said he was “not deemed to be permanent staff.”

The High Court rejected that reasoning. A clause disclaiming permanency cannot override what the facts plainly show. Applying the Federal Court’s test, the court found this was permanent employment dressed up as a series of fixed-term contracts. The termination was a dismissal without just cause or excuse.

This case matters because it answers the question employees most often ask us: “But it says in my contract that I’m not permanent — does that mean I have no case?”

Not necessarily. What the contract says is the starting point, not the ending point.

When the fixed-term genuinely holds

The law is not one-sided. In Zulfeka bin Zainal Abidin v Percetakan Nasional Malaysia Bhd [2024], the Industrial Court upheld a fixed-term arrangement — because the facts supported it.

The two contracts in that case were genuinely distinct. Different position. Substantially different salary. Different terms. The second contract did not even recognise the employee’s service under the first. The claimant argued that he had been orally assured the arrangement was “really permanent” — but oral assurances made before signing a written contract face a significant legal hurdle. There was no documentation. The former Managing Director was not called as a witness. The claim failed.

The distinction between Azrell and Zulfeka is instructive: it is not enough to simply say “I was renewed many times.” What courts look for is the substance of how the employment was actually conducted — and whether that substance matches the fixed-term label.

Questions Worth Asking Yourself Right Now

If you are an employee on a fixed-term contract — or if your contract was recently not renewed — consider:

• Was your contract renewed automatically, without you ever requesting it?
• Were you promoted, or given salary increments, during the contract period?
• Does your work involve a core, ongoing function of the business — not a project with a defined end?
• Did anyone tell you — verbally or in writing — that your position would become permanent?
• Did the company treat you, in practice, the same way it treated its permanent staff?

If the answer to most of those is yes, you may have more standing than you think.

If you are an employer using fixed-term contracts:

• Are your renewals automatic, or do they involve genuine consideration each time?
• Are the roles you are filling genuinely temporary — or are they permanent functions you are simply choosing not to make permanent?
• Does your conduct during the employment — promotions, increments, integration — tell a story that contradicts your paperwork?

A disclaimer clause in the offer letter is not sufficient protection if the employment relationship tells a different story.

This Is Not a Simple Area of Law

Fixed-term contract disputes turn entirely on the specific facts of each case. The same set of documents can produce different outcomes depending on how the employment was actually conducted, what was said during recruitment, how renewals were handled, and what the nature of the work truly was.

Getting this wrong — on either side — carries real consequences. For employees, it can mean losing years of entitlements and protection. For employers, it can mean a dismissal finding, back wages, and compensation.

If you are facing a situation involving a fixed-term contract — whether you are an employee whose contract was not renewed, or an employer wanting to understand your exposure — it is worth speaking with a lawyer before taking any further steps.

Not sure where you stand? We can help.

Our team advises employees and employers across a wide range of employment and industrial relations disputes, including fixed-term contract challenges, wrongful dismissal claims, and Industrial Court proceedings.