Winning against employees on wrongful dismissal

NOVEMBER 27 ― As a follow up to my previous article “The Growing Role of People Managers in Human Resource Management”; Against the backdrop of the steeping rate of lawsuits involving wrongful dismissal claims and companies having to pay substantial compensation cost to claimants, it is difficult to ascertain if employers intentionally show contempt to ― or only fail to take cognizance of industrial relations as well as employment and labour laws despite their long years of existence. However, a veil is certainly being cast upon them in regards to the right procedure involved in the dismissal of an employee. They fail to recall that the legislative landscape of Malaysia is “pro-employee.”

For instance, eight out of every ten case received by the Industrial Court in Malaysia borders on wrongful dismissals. In 2016 alone, 1,226 out of the 1,340 cases brought to the Court were related to unfair dismissals, with about RM21,841,008 awarded against firms. In excess of RM243 million (between 2014-2018) has been awarded as back wages and compensation by the Industrial Court against employers to employees that considered themselves constructively or wrongfully dismissed is an alarming figure and surely 2019 to add significantly with milestone cases, burdening businesses further.

In 2017, Norzaifizy Khalid Nordin, a former employee of Murphy Sarawak Oil Co Ltd, was awarded about RM1.2 million (back wages and compensation) by the Industrial Court after it ruled that he was unfairly dismissed. Also, another employee of the firm, Nor Aini Sabil, was awarded RM540,000 against the same firm in 2019. In 2018, the sum of RM8.8 million was awarded to six former employees against Cekal Teguh Sdn Bhd and Kazakhstan Methanol Limited, based in Malaysia and Hong-Kong respectively, after a project was cancelled.

Similarly, in 2019, Tengku Mohd Hasmadi Tengku Hashim a former employee of Konsortium Transnasional Berhad (KTB) was awarded a whopping RM2.45 million compensation against his former firm for constructive dismissal. Though a lawsuit might be totally unavoidable by firms, however, it is necessary to come to terms with employment actions that are implicative as well as absolving in litigations.

Employees are getting more knowledgeable about their rights, with the readiness to institute litigation against any act that breaches job practices undersigned by them and their employers. Imagine a highly-paid, senior employee dismissed by their employer after ten years of service - the employer tends to get an exposure of up to 34 months of the employee's last drawn salary, which could amount to hundreds of thousands of ringgit. This implies that a quick-to-fire approach employed by some employers poses significant risks to them ― particularly firms in Malaysia.

Managing poor performing employees poses a serious threat to many employers, including managers, as poor performance affects organization growth and productivity. In fact, it is a good justification for employee dismissal. However, retrenching such a poor performing employee requires legally-provided steps and approaches. For instance, the employer must have warned the employee about their poor performance (through emails, official letters, etc) and given the employee sufficient opportunity to improve. Failure of sufficient improvement by the employee may lead the employer to terminate the former's employment.

Industrial Relations Act of 1967

Section 20 of the 1967 Industrial Relations Act provides a window of 60 days ― starting from the day of dismissal ― for an employee who felt unjustly dismissed by their employer to approach the Director-General of Industrial Relations for representation. The Department then organises a reconciliatory meeting ― acting as a mediator ― between the employer and employee to see if the case could be settled amicably, without legal representations from the two parties.

Failure to reach a compromise at the meeting gets the case referred to Minister of Human Resources, who decide whether or not the case needs to be referred to the Industrial Court. If referred, the employee lays a “civil” claim before the Chairman of the Industrial Court with testimonies from witness(es). Upon discovering, based on substantive evidence, that the employee has been unjustly dismissed, they are awarded either reinstatement (which is rarely granted) and back wages or compensation in place of both reinstatement and back wages.

However, the fact that Malaysia provides a haven for terminated employees to seek redress of an unfair termination does not imply that firing an employee is an impossible mission or usually a dead-on-arrival attempt. Conducting such a retrenchment exercise requires absolute compliance with the Code of Conduct for Industrial Harmony. It is necessary that businesses or companies satisfy all legal requirements as regards to taking termination actions. This is by ensuring that the dismissal was carried out with “just cause and excuse” ― that is, proper reasons and justification. Consequently, it will serve in the best defense of the employers in protecting themselves against potential sanctions when a claimant institutes a constructive dismissal lawsuit against them.

Wrongful dismissal claim absolution

Therefore, absolving your business or company from unnecessary payments boils down to management skills, job practices, and employer-employee relationship. The roles of manager have transcended beyond managing people and resources, directing personnel, to include arming themselves with the right skills, knowledge, and qualifications such as a program that I teach in Managing People and Employment Relations; that focusses on how to deal with the ever-increasing plague of wrongful dismissals.

Also as employers, it is necessary to make conditions of service, work condition, job description, tasks performance, key performance indicators (KPIs), code of conduct very clear with your employees. It is also of utmost importance to identify tasks and responsibilities that are subject to change depending on the needs of the organization or prevailing circumstances. This makes workers do their jobs appropriately while also assisting you in identifying any breach in the organization's rule or agreement. There is a place of being objective, direct, and specific when dealing with employees. This is to avoid ambiguity and misunderstandings that often result in a frosty employer-employee relationship.

Conclusion

Summarily, businesses need to mitigate their risks and exposure by ensuring their managers are well qualified to manage people, beyond their conventional roles. Managers need to be trained on assessing performance in line with the established procedures and requirements of the company. Having a robust performance review procedure without managers who can follow the procedure or understand what needs to be done amount to an attempt in futility. If, as employers or business owners, you have taken proactive measures including setting operational standards, discussing shortcomings, giving feedbacks, and suggesting improvements, you may see enough progress (or reasons) to make you withhold any attempt to terminate any worker, or otherwise. It thus becomes a company-wide requirement for all managers to become qualified “People Managers.”

* Associate Professor Dr Roy Prasad is the Dean School of Business Accounting and Management at Genovasi University College.

** This is the personal opinion of the columnist.

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