Case Update: Federal Court rules that an employer cannot use reasons discovered post-dismissal to justify an employee dismissal

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.

It is not uncommon, in instances where an employee has been dismissed, for new facts or circumstances to be discovered post-termination which are then treated as “justifying” the dismissal in the eyes of the employer.

For example, where an employee has been dismissed for poor performance, the employee or employees who then take on the dismissed employee’s responsibilities may discover a trail of errors or negligence that ran deeper than was known at the point of termination. In other cases, the employee may have been dismissed for one reason, but the employer later uncovers evidence of other misbehaviour or misconduct which the employer then takes as further proof that the dismissal was “the right decision”.

While these post-dismissal discoveries may make an employer rest more easily, convinced that dismissal was the correct option, what would happen if the employee brings an unfair dismissal claim? Would an employer who dismissed an employee because of Reason A be then able to justify the dismissal by later saying that, after the termination, they also discovered Reason X, Y, and Z, and that therefore even if Reason A was weak and insufficient to justify termination, the court should also consider Reasons X, Y, and Z?

This was the issue that went all the way to the Federal Court recently, in Maritime Intelligence Sdn Bhd v Tan Ah Gek [2021] 4 ILR 417.

Relevant facts

In the Maritime Intelligence case, the employee (“Employee”) was dismissed for alleged misconduct including belittling and undermining the authority of a director, and other unethical and unprofessional behaviour.

The Employee made a representation under Section 20 of the Industrial Relations Act 1967 (“the Act”) that she had been dismissed without just cause or excuse. The Industrial Court sided with the Employee, and found that the dismissal was without just cause and excuse.

However, it was during the Industrial Court proceedings that this issue arose of the Company relying on issues discovered after the dismissal. The Company raised for the first time in its pleadings the allegation that the dismissal was justified because the Employee was never qualified for her position from the outset, as it was discovered post-dismissal that her Master’s degree was from a university that was unaccredited in Malaysia. The Industrial Court ignored this issue, and the Company appealed the decision.

Both the High Court, and later the Court of Appeal, dismissed the Company’s appeals for differing reasons. The Company was granted leave to appeal to the Federal Court on two questions of law, the relevant one for this case update being: Whether the Industrial Court has the right to enquire into reasons subsequently put up by the employer via pleading to justify the dismissal, even if such reasons were not given at the time of the dismissal.

Federal Court decision: Employers cannot rely on post-dismissal reasons to justify termination

The Federal Court dismissed the Company’s appeal, ruling that the Company could not rely on the post-dismissal reasons to justify the termination. In coming to the decision, the Federal Court interpreted Section 20 of the Act. Section 20(1) of the Act provides the statutory basis for an unfair dismissal claim — “Where a workman […] considers that he has been dismissed without just cause or excuse by his employer, he may make representations in writing to the Director General to be reinstated in his former employment […]” — and Section 20(3) provides for the representation to be referred to the Industrial Court for an award. In summary, the Federal Court ruled as follows:

  • Section 20(1) makes it clear that an Employee can lodge representations (an unfair dismissal complaint) based on his/her own subjective view that his/her employment has been terminated without a well-grounded, impartial and reasonable basis. The Industrial Court’s jurisdiction, which is created by the Act, is solely to consider the Employee’s representations of dismissal without just cause or excuse.
  • The Industrial Court’s function is bound to the Employee’s representations, which are made “at the time of his dismissal” and the focus of the Industrial Court’s enquiry must therefore be “premised on matters and events as they occurred at the time of the dismissal”. The Industrial Court’s jurisdiction is limited to “the reasons, factors or events operating in the mind of the employer at the time of dismissal” which resulted in the Employee’s representation.
  • There is no provision for the Industrial Court to consider matters outside of the Employee’s representation, and the very specific wording of Section 20 does not allow “an overarching survey by the Industrial Court of any and all matters both pre and post-dismissal” to decide on the Employee’s complaint. The Act “implicitly prescribes an investigation into facts and events and reasons at the point and/or time of dismissal”.
  • A “just cause or excuse” for dismissal “can only refer to the reason resonating in the employer’s mind, prior to, or preceding the decision to dismiss” and cannot include “matters or reasons that the employer discovers subsequently”. Any new evidence cannot be used retrospectively to justify a termination which was not carried out for those reasons or on that basis, because that “cause” was not on the employer’s mind when deciding to dismiss.
  • Even in cases where an employer failed to hold an inquiry (or was found to have held a defective inquiry) prior to dismissal, and the employer can then present evidence and testimony to justify the basis for dismissal before the Industrial Court, the employer cannot introduce fresh matters and events or occurrences that came to the employer’s attention post-dismissal as being a good reason to justify dismissal. The reasons given to the Industrial Court “should be the reasons operating in the mind of the employer at or immediately prior to the dismissal” and “the material time is the period relating to and immediately prior to the dismissal [and] does not extend to other reasons occurring to the employer subsequently”.
  • In cases where the employer does not give the employee any reasons for the dismissal, the Industrial Court will embark on its own inquiry, and the employer will be allowed to adduce evidence to explain why the dismissal was with just cause or excuse. However, again, “such evidence must be evidence which was evident and operational in the employer’s mind immediately prior to, or at the time of dismissal” and the employer cannot adduce evidence which came up post-dismissal, as those factors did not make the employer decide to terminate.

Post-dismissal discoveries are still relevant

The Federal Court did point out that their conclusions above do not mean that events after the Employee’s representation cannot be considered at all. Any subsequent matters or “compelling new facts” can be adduced by the employer as evidence, and will be considered by the court in deciding on the appropriate relief or remedy. Such evidence can be used to counter an employee’s claim for reinstatement, or lead to the Industrial Court deciding not to award the employee compensation in lieu of reinstatement, or to even reduce the amount of any relief awarded.

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