Case Update: Court of Appeal considers whether an employer can dismiss an employee for insubordination

Case Updates (FB)

In this Case Update series, I share summaries of recent Malaysian court decisions to explore the current approach taken by the courts when deciding on employment-related issues. You can find all the posts in the series by clicking here, including case updates on other legal areas by TheMalaysianLawyer co-founder Lee Shih.

Insubordination is where an employee wilfully disobeys or ignores an employer’s legitimate instructions. Malaysia’s Industrial Court has established via many previous decisions that insubordination is capable of being a serious misconduct which is sufficient to destroy the employment relationship and justify a dismissal.

However, as is the case for employee misconduct in general, not all instances of insubordination will amount to just cause for an employer to dismiss an employee. The Court of Appeal considered this issue in Ngiam Geok Mooi v. Pacific World Destination East Sdn Bhd [2016] 6 CLJ 395.

Brief facts

The appellant (the Employee) had been employed by the respondent (the Employer) since 1 November 1989. There had been no disciplinary issues with the Employee prior to the actions which led to her dismissal by the Employer on 30 December 2009.

According to the Employer, the Employee —

  1. refused to follow her superior’s instructions to make payment for a corporate expense and make adjustments to the company budget; and
  2. wrote an e-mail saying she would no longer report to the said superior.

The Employee applied for reinstatement at the Industrial Court. The Industrial Court found that the Employee was indeed guilty of insubordination (one act of insubordination, due to the abovementioned email), but that the Employer’s decision to terminate was too harsh, and ordered the Employer to pay compensation and backwages to the Employee.

The Employer applied to the High Court for a judicial review of the Industrial Court’s decision, and the High Court allowed the application and quashed the award of the Industrial Court.

The Employee subsequently appealed to the Court of Appeal.

Sole issue to be considered

The sole issue to be decided by the Court of Appeal was whether the decision to terminate the Employee’s services was proportionate to the proven misconduct.

Findings of the Court

The Court of Appeal stressed the importance of the principle of proportionality, which required the court “to strike an effective balance between the severity of an employee’s conduct and the sanction imposed”.

The Court pointed out the well-settled position in Malaysia that the Industrial Court has jurisdiction to substitute its own view regarding the quantum and/or degree of punishment imposed by an employer on an employee.

Applying the proportionality test, the Court of Appeal held that the High Court committed a grave error in interfering with the Industrial Court’s award. The Employer’s decision to dismiss the Employee was unduly harsh and grossly disproportionate to the gravity of the misconduct committed by the Employee, and the Employee had therefore been dismissed without just cause and excuse.

The Court of Appeal justified its decision as follows:

  1. The Employer had worked for the Employer for 20 years.
  2. The Employee had an unblemished employment record.
  3. The Employee was instrumental in setting up the Employer’s headquarters in Penang and the branch office in Kuala Lumpur.
  4. The Employee’s tireless and faithful service to the Employer is evidenced by the profits earned by the Employer.
  5. The Employee had committed a single act of insubordination.
  6. The said insubordination was the Employee’s first misconduct in her long years of service. There was no history of past misconduct; not even a warning was given to her at any point of time.

The Court of Appeal stressed that the management’s prerogative to discipline its employees must be exercised in a manner which is reasonable and fair. Before dismissing an employee, an employer should consider whether a less severe punishment might suffice.

The following award of the Industrial Court was therefore affirmed: Total payment by the Employer to the Employee of RM1,044,480.00, less statutory deductions, calculated as follows:

  • Compensation in lieu of reinstatement of one month’s wages per year of service: RM32,640 x 20 = RM652,800.00.
  • Backwages of 24 months (the maximum pursuant to the Industrial Relations Act): RM32,640 x 24 = RM783,360.00 — but subject to rescaling downwards of 50% for the Employee’s contributory conduct due to the insubordination = RM391,680.00.

Comments

I mentioned at the beginning of this case update that insubordination is where an employee wilfully disobeys or ignores an employer’s legitimate instructions. There are two important elements in establishing insubordination:

  1. The employer’s instructions must be lawful and reasonable.
  2. The employee’s disobedience must be wilful — ie not just due to an oversight or negligence.

As evidenced by the current case update, not all insubordination will justify dismissing an employee — the punishment should be proportionate.

Employers should consider the following when deciding on the appropriate disciplinary action for an insubordinate employee:

  • The employee’s disciplinary record. If the employee has a good disciplinary record, a warning is probably more appropriate.
  • Is the intended disciplinary action proportionate to the seriousness of the misconduct? Dismissal is the most severe punishment and should be used only if justified by a serious or recurrent misconduct.
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