Case Update: Employee dismissed after sexual harassment complaint deemed unfairly dismissed due to improper process

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.

Malaysian employers are still coming to terms with how to properly handle sexual harassment complaints. While many employers have been introducing anti-harassment policies and processes, and organising awareness and training sessions for employees, mistakes are still often being made in responding to complaints of workplace sexual harassment.

In a previous Case Update, I wrote about a case which illustrated how a mismanaged harassment complaint could expose an employer to a constructive dismissal claim (“Case Update: Employer’s poor handling of workplace assault and harassment complaints amounts to constructive dismissal”). I have also previously shared an Industrial Court case which serves as a useful overview for how the court views workplace sexual harassment (“Case Update: A guide to how the Industrial Court assesses sexual harassment complaints”).

This Case Update reviews the Industrial Court award in Lim Po Seng v Resort Villa Golf Course Berhad (Award No. 471 of 2023), where the court decided that an employee who was dismissed pursuant to a sexual harassment complaint was unfairly dismissed.

It should be noted that the internal handling of workplace sexual harassment complaints by employers is a separate issue from the Anti-Sexual Harassment Act 2022, which provides for the establishment of a Tribunal for Anti-Sexual Harassment with jurisdiction to hear and determine sexual harassment complaints.

Circumstances leading to the employee’s dismissal

The claimant (“Claimant”) had been employed by the company (“Company”), which operated a golf course, since September 2011. On 21 August 2018, the Company issued the Claimant a suspension letter on allegations he had committed serious misconduct in sexually harassing another employee (“Complainant”). This was in response to the Complainant informing her superior of the alleged sexual harassment incident on 14 August 2018, lodging a police report on the same day, and lodging a written complaint to the Human Resource Department on 17 August 2018.

The Company did not issue a show cause letter to the Claimant or take any statements from the Claimant, and after conducting an internal investigation proceeded to notify the Claimant on 24 August 2018 that a domestic inquiry would be held on 29 August 2018 to consider three charges of misconduct (in brief — grabbing the Complainant’s hand and moving it towards his crotch, trying to hug her without consent, and using sexually suggestive language).

The panel of inquiry at the domestic inquiry found the Claimant guilty of all the charges, and the Company dismissed the Claimant on 4 September 2018. The Claimant vehemently denied all the charges, and claimed that he had been unfairly dismissed.

The Industrial Court’s findings

The Industrial Court set out the basic approach when it comes to unfair dismissal claims:

Dismissal must be with just cause or excuse.
The burden of proof lies with the Company to prove that the dismissal was with just cause or excuse.
The standard of proof required is on the balance of probabilities.

The Court also stated that —

it views any acts of any employee causes a fellow employee to be put in an environment that causes fear or distress due to harassment or aggression as misconduct that warrants appropriate punishment depending on the circumstances of the case and the gravity of the misconduct;
harassment involving acts which are sexual in nature giving rise to workplace sexual harassment cannot be tolerated under any circumstances; and
the resultant punishment may invariably be an outright dismissal depending on the seriousness of the act.

Although the Company’s decision to dismiss the Claimant was made after a domestic inquiry found the Claimant guilty of the charges, the Industrial Court relied on a Court of Appeal decision (Hong Leong Equipment Sdn Bhd v. Liew Fook Chuan & Other Appeals), where the Court of Appeal stated that the fact that an employer has conducted a domestic inquiry is “entirely irrelevant” to whether the employee was fairly dismissed, as the findings of a domestic inquiry are not binding on the Industrial Court. In any case, the Industrial Court found that the domestic inquiry proceedings in this case were “riddled with many unsatisfactory features” and considered the available evidence afresh in coming to its decision.

In summary, the Court made the following findings:

The tone of the suspension letter issued to the Claimant suggested that the Company did not even care to state that it was only an allegation which required further investigation, but gave the impression that the Company had most likely believed that the Claimant had committed the alleged misconducts. The problematic language appears to be that the letter read: “In view of the above report and misconduct, you are being suspended […]”
The Company informed the Claimant on 24 August 2018 that there were three misconduct charges, and that a domestic inquiry would be held on 29 August 2018. However, the Company then “rushed” to obtain “hasty statements” from witnesses two days before the domestic inquiry. The Company also “conveniently omitted” to obtain a statement from the Claimant, and issue a show cause letter to seek his explanation. The Court concluded that the Company’s conduct was “undesirable” and fortified the belief that “the Company was more fixated in finding the Claimant guilty without even giving the Claimant proper and adequate opportunity to defend himself”.
Regarding the charge that the Claimant had grabbed the Complainant’s hand and moved it towards his crotch, the Company did not produce any evidence to support this. The Complainant also admitted that she had lodged a false police report on 14 August 2018, which she later corrected with a subsequent report on 17 August 2018. However, the subsequent police report was ignored by the Company and not produced before the domestic inquiry or the Industrial Court. The Court found that the Company’s act of intentionally withholding the second police report as “objectionable” and disapproved of the conduct of the Company and its witnesses, further stating that it “reflects the extent the Company is prepared to go to maintain its findings of guilt against the Claimant”.
The Complainant also gave evidence that her immediate superior had encouraged or persuaded her to lodge the police report despite the Complainant telling him that there was no evidence of the allegations.
The Court also took into account the fact that the Claimant was put through criminal proceedings as a result of the same allegations. The Claimant was charged in the Magistrate Court with outraging the modesty of the Complainant. The Magistrate Court acquitted the Claimant without his defence being called, and the High Court also dismissed the appeal. The Court took into account the fact that the Complainant’s sworn testimony in the Magistrate Court gave a “completely different set of facts” and made her “a very unreliable witness”.
The formulation of the three charges of misconduct which led to the Claimant’s dismissal was based on “a proven false” police report and complaint, and the evidence against the Claimant was rife with “contradiction and inconsistency”. The manner in which the domestic inquiry was conduct was “unsatisfactory” and the Company reached a “biased conclusion” without properly considering all material evidence. The Court also took into account the fact that there were no eyewitnesses to the alleged incident, contrary to what was stated by the Complainant in the initial police report.
The Court found that there was overwhelming evidence that the Company had a “premeditated intention” of finding the Claimant guilty. The Claimant had informed the Company that there was a CCTV at the location of the alleged incident which would prove his innocence, and also raised this during the domestic inquiry. However, the Company did not take any steps to produce the CCTV recording during the domestic inquiry or at the Industrial Court proceedings. A Company witness said that the CCTV memory card had disappeared, but the Court found that the Company made no effort to locate the missing memory card or to take action against the employees responsible for the loss of the memory card.
The Court concluded that the Claimant was dismissed without just cause or excuse and awarded him 30 months wages (maximum backwages of 24 months, plus compensation in lieu of reinstatement of 6 months wages).

Takeaways for employers

Sexual harassment is undoubtedly a very serious issue, and a serious misconduct which would justify the immediate dismissal of guilty employees. However, employers need to take great care in managing the process which starts from a complaint being received, and leads to their findings of innocence or guilt. Clarity, consistency, and ultimately fairness in the process is crucial to all parties involved.

In the current case, the Industrial Court found many flaws in the process, and employers can learn from the following findings in particular:

The Court stated that the correct process is that an investigation should be “to obtain all materials and evidence of an alleged act of wrong doing and most importantly statements from the accused person, weigh them accordingly and then formulate charges based on all the available materials and evidence if warranted”. Instead, in this case, the Court found that the Company formulated the charges and then found pieces of evidence to suit the charges which had been formulated. Employers should care to ensure that any investigation is conducted fairly and thoroughly before formulating any charges.
The Court found that the Company rushing through the domestic inquiry without taking statements from the Claimant “had certainly caused serious flaws in the Company’s case” and “had shown an alarming level of unfair labour practice”. Employers should always ensure that an accused employee is allowed an opportunity to give his/her side of the story.

Employers should also take into account some other potential pitfalls which were set out in a previous article: Case Update: Employer’s poor handling of workplace assault and harassment complaints amounts to constructive dismissal.

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