Unfair Dismissal Malaysia: Laws, Process and Remedies

Losing a job is hard, and harder still if you believe the reason was not fair. The good news is that the law on unfair dismissal in Malaysia gives employees a clear route to challenge a termination they consider unjust, and it places real obligations on employers to act properly. This article explains what unfair dismissal means, what counts as a fair reason, the 60-day rule, how a claim moves through the Industrial Court, and the remedies available.

What is unfair dismissal in Malaysia?

Unfair dismissal in Malaysia arises where an employee is terminated "without just cause or excuse," a phrase that comes from Section 20 of the Industrial Relations Act 1967.

Malaysian law treats an employee's security in their job seriously, to the point that the courts have described the right to remain in gainful employment as something that should not be taken away except for a proper reason. In short, an employer cannot simply end employment at will and expect that to be the end of the matter.

What counts as just cause or excuse?

For a dismissal to stand, the employer needs a valid and reasonable ground. Common

examples accepted by the courts include misconduct, poor performance, and genuine

redundancy or retrenchment. Beyond having a good reason, the employer must also have acted fairly in the process leading to the dismissal, for instance by carrying out a proper inquiry into alleged misconduct.

One point catches many employers out. While the Employment Act 1955 allows either side to end a contract by giving notice, the courts have consistently held that terminating on contractual notice alone does not amount to just cause or excuse. Paying notice, or salary in lieu of notice, does not by itself make a dismissal fair.

Constructive dismissal

Not every unfair dismissal involves being formally sacked. Constructive dismissal occurs

where an employer commits a fundamental breach of the employment contract, such as

cutting pay or demoting an employee without consent, leaving the employee no real choice but to resign. In law, the employee may then claim they were constructively dismissed. The key difference is that in a constructive dismissal claim, the burden is on the employee to prove the employer's breach, rather than on the employer.

The 60-day rule and how a claim works

Timing is critical. An employee who wants to challenge a dismissal must file a written representation with the Director General of Industrial Relations within 60 days of the dismissal. Missing that deadline and the right to bring the claim is generally lost, so acting

quickly matters. At this stage, the representation primarily seeks reinstatement to the job.

Once filed, the process usually runs as follows. The Industrial Relations Department

arranges a conciliation meeting, where an officer acts as a mediator to see whether the

parties can settle, often through a compensation payment. Legal representation is not

allowed at conciliation. If no settlement is reached, the Director General refers the matter directly to the Industrial Court for determination, and the court is bound to hear it. At the Industrial Court, the matter is heard much like a trial, with witnesses and documents, and legal representation is permitted.

Who has to prove what

In a typical dismissal case, the employer carries the burden of proof. It must satisfy the

Industrial Court both that there was a genuine reason for the dismissal and that the dismissal was carried out fairly. The exception is constructive dismissal, where, as noted, the employee must first prove the employer's fundamental breach. This is why documentation matters so much for both sides: performance records, warning letters, inquiry notes and clear contracts can decide the outcome.

Remedies if your dismissal was unfair

If the Industrial Court finds the dismissal was without just cause or excuse, it can grant

remedies under the Industrial Relations Act.

These are typically:

● Reinstatement, returning the employee to their former job.

● Compensation in lieu of reinstatement, often calculated at one month's salary for each year of service, where reinstatement is not practical.

● Backwages, covering the period from dismissal to the award, subject to statutory

limits of up to 24 months for a confirmed employee, or up to 12 months for a probationer.

The exact award depends on the facts, including length of service and the circumstances of the dismissal.

Practical advice for employees and employers

For employees, the most important step is to act within the 60-day window and to gather

everything relevant, including the employment contract, the termination letter, and any emails or records that support your case. For employers, the lesson from unfair dismissal Malaysia cases is consistent: keep clear records, follow a fair process, and make sure any dismissal rests on a genuine, defensible reason. Good documentation is the best protection if a termination is later challenged.

---

Frequently asked questions

How long do I have to bring an unfair dismissal claim?

You must file a representation with the Director General of Industrial Relations within 60 days of your dismissal. After that, you generally cannot bring the claim, so prompt action is essential.

Is being paid notice enough to make a dismissal fair?

No. Terminating on notice, or paying salary in lieu of notice, does not on its own amount to just cause or excuse. The employer still needs a valid reason and a fair process.

What is the difference between dismissal and constructive dismissal?

A dismissal is where the employer ends the employment. Constructive dismissal is where the employer's serious breach forces the employee to resign. In the latter, the employee must prove the breach.

How much compensation can I get?

Where reinstatement is not ordered, compensation in lieu is often about one month's salary per year of service, plus backwages of up to 24 months for confirmed employees, or up to 12 months for probationers.