Poor Performance Dismissals: What the Industrial Court Expects Employers to Prove

A poor performance dismissal will only be upheld in Malaysia if the employer proves that the employee was made aware of the required standards, was warned of the shortfalls, and was given a sufficient and genuine opportunity to improve before termination.

What is the legal test for performance dismissals?

The Industrial Court consistently applies a three-limb test: the employee was informed of the required performance standards; the employee was warned that performance fell short; and the employee was given sufficient opportunity to improve, with assistance where appropriate. Only if performance still does not improve will dismissal constitute just cause or excuse.

Unlike misconduct, poor performance is rarely a single event — so the evidential burden is met through a paper trail built over months, not a single termination letter.

How should a performance improvement plan be structured?

A defensible PIP states the specific deficiencies with examples, sets measurable targets, fixes a realistic duration (commonly 3 months, scaled to the role), identifies support such as training or supervision, schedules review checkpoints, and warns expressly that failure may result in termination.

Two design errors recur in litigated cases: targets that are new or higher than those applied to peers (which suggests a set-up to fail), and PIP durations too short for the targets to be achievable. Both invite findings that the exercise was a sham.

What evidence wins or loses these cases?

Cases are won on contemporaneous appraisals, emails recording counselling sessions, warning letters and PIP review minutes. They are lost when the employee’s appraisal history is satisfactory, when bonuses or increments were paid during the alleged underperformance, or when the dismissal follows shortly after a protected act such as a grievance or whistleblowing report.

Where performance issues stem from redundancy of skills rather than effort, employers should consider redeployment or retrenchment routes instead — mislabelling the true reason is itself a ground for finding the dismissal unfair, since the employer is bound by the reason it advances (Goon Kwee Phoy v J & P Coats (M) Bhd).

Key Takeaways for Employers

• Prove standards, warnings and a genuine opportunity to improve — all three limbs.
• PIPs need measurable targets, realistic timelines, support and an express warning of consequences.
• Inconsistent records (good appraisals, bonuses, increments) destroy performance cases.
• Do not disguise other reasons as poor performance; the employer is bound by the reason it pleads.
• Keep the process humane and documented — counselling notes are evidence, not bureaucracy.

Frequently Asked Questions

How long should a performance improvement plan run?

There is no statutory period. The Industrial Court asks whether the opportunity was sufficient and genuine — commonly around 3 months, adjusted to the seniority of the role and nature of the targets.

Can an employer dismiss for poor performance without any PIP?

It is possible but risky. The employer must still prove warnings and opportunity to improve by other means. A structured PIP is the clearest evidence of both.

Is poor performance misconduct? No. Poor performance (incapability) is conceptually distinct from misconduct, and the processes differ — performance requires warnings and improvement opportunity rather than a domestic inquiry, although serious negligence can amount to misconduct.