Unfair Dismissal: Industrial Court Awards a Former Group Financial Controller RM178,000 After Vague Charges Fail

Case Background & Strategy

An employer in Malaysia that dismisses an employee on vague, unparticularised charges, without considering his explanation, will struggle to prove just cause in the Industrial Court. In Eric Boon Chuan Kit v Metronic Engineering Sdn Bhd (Award No. 430 of 2019), our partner Khoo Ai Theng acted for the claimant, Eric Boon Chuan Kit, a group financial controller dismissed during a special audit, and the Industrial Court awarded him RM178,000.

Case at a Glance

The Problem: Dismissed on Five Charges During a Special Audit

Our client was appointed group financial controller of Metronic Engineering Sdn Bhd in October 2015 and confirmed in April 2016 with a salary increase. In 2017, when a special audit was commissioned on the recommendation of Bursa Malaysia and the company’s auditor, the company placed him on leave of absence and then extended that leave. On 29 June 2017 it issued a show cause letter alleging five acts of misconduct: entering the office after hours during his leave, disclosing company secrets, losing land titles, failing to submit monthly and quarterly reports on time, and habitual lateness. He answered each allegation in writing on 1 July 2017. Ten days later, without holding an inquiry, the company dismissed him.

Our Strategy: Hold the Employer to Its Burden of Proof

Because the company dismissed him, the burden was on the company to prove each charge and that dismissal was justified. We showed that the charges were vague and unparticularised, that the leave letters never barred him from the office, that the company’s own executive director had instructed him to finalise the quarterly management accounts while he was on leave, and that the termination letter ignored his detailed explanation. The executive director whose evidence was central to the company’s case did not attend the hearing, so the court disregarded his witness statement.

The Industrial Court’s Decision

The Industrial Court found every charge unproven. The leave letters did not prohibit our client from entering the office, and he could hardly finalise the accounts he had been told to prepare without access to it. The charges of disclosing secrets and losing land titles gave no particulars of what was disclosed, to whom, or which titles were missing, and the company’s witness could not supply them. He could not be faulted for late monthly reports for a month in which the company had put him on leave, and the lateness charge ignored the flexible clock-in practice for heads of department. The court also criticised the company for dismissing him with such haste that the termination letter did not even refer to his explanation.

Holding that the dismissal was without just cause or excuse, the court considered reinstatement unsuitable and awarded compensation instead: 24 months’ backwages at his last drawn salary of RM10,000, less a 30% deduction for post-dismissal earnings, amounting to RM168,000, plus RM10,000 as compensation in lieu of reinstatement, a total of RM178,000.

The Law in Brief: Just Cause, Particulars and Fair Process

Under section 20 of the Industrial Relations Act 1967, the Industrial Court decides whether the misconduct alleged by the employer was committed and, if so, whether it amounts to just cause or excuse for dismissal. Where the employer dismisses, the employer bears the burden of proof on the balance of probabilities. Charges should be particularised so that the employee knows exactly what he must answer, and his explanation should be genuinely considered before any decision is made.

Where a dismissal is unjustified, the court may order reinstatement or compensation in lieu of reinstatement, usually one month’s salary for each completed year of service, together with backwages. Under section 30(6A) and the Second Schedule, backwages are capped at 24 months for a confirmed employee, and the court may deduct a proportion for post-dismissal earnings.

Key Takeaways

• In a dismissal case, the employer must prove the misconduct and that it justified dismissal.
• Vague, unparticularised charges are difficult to prove and unfair to answer.
• An employee cannot be faulted for work he was prevented from doing while on leave.
• Ignoring the employee’s written explanation weakens the employer’s case.
• If a key witness does not attend, the court may disregard his witness statement.
• Compensation is usually backwages of up to 24 months plus compensation in lieu of reinstatement.

Frequently Asked Questions

Related reading: Industrial Court rules in favour of ex-Metronic CFO; The defamation suit that followed: late amendment of defence refused.

Dismissed after answering a show cause letter, or defending a dismissal claim? Book a consultation with NZSK so we can review your documents and advise on the next step. Learn more about our employment law practice.

Messrs Ng, Zainurul, Seke & Khoo (NZSK) is a Malaysian law firm with offices in Mont Kiara, Kuala Lumpur and Puchong, Selangor. Partner Khoo Ai Theng, an Advocate & Solicitor of the High Court of Malaya since 2014, acts for employers and employees in Industrial Court and High Court employment disputes and is a co-author of Malaysian Employment & Industrial Relations Law.