Just Cause and Excuse in Malaysian Employment Law: When Can an Employer Lawfully Dismiss an Employee?

Many employers believe that an employee can be dismissed simply by giving the notice stated in the employment contract.

Contractually, that may sound straightforward. Under Malaysian industrial law, however, paying salary in lieu of notice does not necessarily make the dismissal fair.

An employer must generally be able to show that the employee was dismissed with just cause or excuse. In practical terms, there must be a fair and genuine reason for the dismissal, supported by evidence and followed by a fair process.

This principle sits at the heart of unfair dismissal law in Malaysia.

What Does “Just Cause or Excuse” Mean?

The expression comes from section 20(1) of the Industrial Relations Act 1967 (“IRA”). It allows a workman who considers that they have been dismissed “without just cause or excuse” to make a representation for reinstatement.

A small point of legal housekeeping: the wording used in the IRA is technically “just cause or excuse”, although lawyers, employers and employees commonly refer to the concept as “just cause and excuse”.

The Act does not provide an exhaustive definition of the expression. This is deliberate. Whether a dismissal is justified depends heavily on the facts, the employee’s conduct, the employer’s reason and the manner in which the dismissal was carried out.

The Industrial Court is required to decide cases according to equity, good conscience and the substantial merits of the case rather than being overly constrained by technicalities.

Put simply, the Court will usually ask:

1. What was the real reason for the dismissal?
2. Has the employer proved that reason?
3. Was dismissal a proportionate response?
4. Was the employee treated fairly before the decision was made?

Giving Contractual Notice Is Not Always Enough

An employment contract will usually contain a clause allowing either party to terminate the employment by giving notice or paying salary in lieu of notice.

That clause remains relevant, but it does not give an employer an unrestricted right to dismiss an employee without a proper reason.

A dismissal based only on a contractual notice clause, without any underlying justification, is sometimes described as termination simpliciter.

In Dr A Dutt v Assunta Hospital [1981] 1 MLJ 304, the Federal Court rejected the proposition that an employer could avoid the safeguards of industrial law merely by terminating an employee under a contractual notice provision.

The same principle is reflected in Goon Kwee Phoy v J & P Coats (M) Bhd [1981] 1 MLJ 129. Where an employer gives a particular reason for dismissal, the Industrial Court must examine whether that reason existed and whether it justified the dismissal. The employer generally cannot rely on an entirely different reason after the dispute reaches court.

The Department of Industrial Relations has similarly explained that contractual notice alone does not displace the employer’s obligation to demonstrate just cause or excuse. (Department of Industrial Relations Malaysia)

In other words, a notice clause determines matters such as the required notice period. It does not automatically answer whether the dismissal itself was fair.

Who Must Prove Just Cause or Excuse?

Once a dismissal is established, the burden generally falls on the employer to prove that it was carried out with just cause or excuse.

This distinction matters. An employee does not ordinarily have to begin by proving that the dismissal was unfair. The employer must justify the decision it made.

The position may be different where the employer disputes that any dismissal occurred. In a constructive dismissal claim, for example, the employee must first establish that the employer committed a fundamental breach which entitled the employee to treat the employment relationship as terminated.

Common Grounds That May Amount to Just Cause or Excuse

There is no closed list of reasons that can justify dismissal. The most frequently encountered grounds are:

• employee misconduct;
• poor performance;
• redundancy or retrenchment;
• incapacity or prolonged inability to perform the job; and
• other substantial reasons affecting the employment relationship.

Having a recognised reason is only the starting point. Each ground comes with its own legal requirements.

An employer cannot simply label an employee “poor performing”, “redundant” or “dishonest” and assume that the label proves the case.

1. Dismissal for Misconduct

Misconduct generally refers to conduct that is inconsistent with the employee’s express or implied obligations.

Examples may include:

• dishonesty, theft or fraud;
• insubordination;
• unauthorised absence;
• serious or repeated lateness;
• breach of confidentiality;
• conflict of interest;
• sexual harassment;
• violence at the workplace;
• falsifying documents or claims; and
• serious breaches of workplace policies.

Section 14(1) of the Employment Act 1955 permits an employer, after due inquiry, to dismiss an employee without notice, downgrade the employee or impose a lesser punishment for misconduct inconsistent with the fulfilment of the employee’s conditions of service. (Employment Act 1955)

However, not every mistake or breach warrants dismissal.

The two questions considered by the Industrial Court

In Wong Yuen Hock v Syarikat Hong Leong Assurance Sdn Bhd [1995] 2 MLJ 753, the Federal Court explained that the Industrial Court’s function in a misconduct dismissal is essentially twofold:

1. Was the alleged misconduct established?
2. If it was established, did it constitute just cause or excuse for dismissal?

The second question is sometimes overlooked.

Suppose an employee with 20 years of clean service submits a reimbursement claim containing an accidental RM10 error. The mistake may technically amount to a breach of procedure, but immediate dismissal could still be excessive when the circumstances are considered as a whole.

The punishment must be proportionate

The employer should consider factors such as:

• the seriousness of the misconduct;
• whether it was deliberate;
• the employee’s position and responsibilities;
• the employee’s length of service;
• the employee’s previous disciplinary record;
• whether the misconduct caused loss or exposed the employer to risk;
• whether the employee admitted and corrected the mistake; and
• whether similar cases were treated consistently.

Dismissal is the industrial equivalent of capital punishment. It should usually be reserved for misconduct serious enough to destroy the trust and confidence required in the employment relationship, or repeated misconduct that has not been corrected despite appropriate warnings.

The Ministry’s published Industrial Court material also recognises the two-stage analysis of whether misconduct was proved and whether it justified dismissal. (Department of Labour and Industrial Relations repository).

2. Dismissal for Poor Performance

Poor performance is not the same as misconduct.

A poor performer may be trying but failing to meet the required standard. Misconduct, on the other hand, usually involves a wrongful act, omission or deliberate failure to comply with an obligation.

Before dismissing an employee for poor performance, an employer should generally be able to show that:

1. the required performance standard was reasonable and clearly communicated;
2. the employee was informed of the areas in which they were underperforming;
3. the employee was warned about the possible consequences;
4. the employee was given reasonable time, guidance and opportunity to improve; and
5. the employee failed to achieve the required improvement.

A Performance Improvement Plan, or PIP, may help document this process. But a PIP is not a magic document that automatically validates a dismissal.

The targets must be realistic. The assessment must be genuine. The employee must be given meaningful support and sufficient time to improve. A PIP designed with impossible targets merely to manufacture a reason for dismissal may do more harm than good to the employer’s case.

3. Dismissal Due to Redundancy or Retrenchment

Redundancy is another recognised basis for termination, but the employer must establish that the redundancy was genuine.

This may arise where:

• a position is no longer required;
• business functions are reorganised;
• operations are reduced or closed;
• work is outsourced;
• technology replaces certain functions; or
• financial or operational changes result in surplus labour.

The focus is ordinarily on whether the employee’s role or functions have become redundant not merely whether the employer would prefer someone else to perform the job.

The employer should also be able to explain:

• why the redundancy arose;
• how the affected positions were identified;
• what selection criteria were used;
• whether those criteria were applied fairly;
• whether suitable alternative employment was considered; and
• whether statutory, contractual and Code of Conduct requirements were observed.

Calling a dismissal a “restructuring exercise” will not save it if the employee is removed only to be replaced shortly afterwards by someone performing substantially the same functions.

Related reading: Retrenchment in Malaysia: Can Your Employer Really Let You Go? A Practical Guide to Your Rights

4. Probationers Are Also Protected

A probationary employee does not enjoy automatic confirmation. Nevertheless, a probationer is not without employment protection.

In Khaliah Abbas v Pesaka Capital Corporation Sdn Bhd [1997] 1 CLJ 636, the Court of Appeal recognised that a probationer enjoys the same protection against dismissal without just cause or excuse as a confirmed employee.

An employer may decline to confirm a probationer whose performance or suitability falls below the required standard. However, the decision should still be based on a genuine and supportable assessment.

Where performance is the issue, the probationer should ordinarily be informed of the shortcomings and given a reasonable opportunity to improve. “You are still on probation” is not, by itself, a complete answer to an unfair dismissal claim.

Related reading: The Rights of a Probationary Employee in Malaysia

Fair Reason and Fair Process

Just cause or excuse is not concerned only with whether an employer had a reason. The way the employer arrived at and acted upon that reason is also important.

A fair disciplinary process will commonly involve:

1. investigating the allegation;
2. providing the employee with sufficient particulars of the complaint;
3. giving the employee a reasonable opportunity to respond;
4. considering the response with an open mind;
5. conducting further inquiries where necessary;
6. deciding whether the allegation is proved; and
7. imposing a proportionate disciplinary measure.

The process should comply with the basic rules of natural justice. The employee must know the case against them and have a meaningful opportunity to answer it. The decision-maker should also be impartial and should not treat guilt as a foregone conclusion.

Is a Domestic Inquiry Mandatory Before Dismissal?

Section 14 of the Employment Act 1955 uses the words “after due inquiry”. This is sometimes taken to mean that a formal domestic inquiry must be conducted in every misconduct case.

That is too broad.

A formal domestic inquiry is not invariably required before every dismissal. What matters is whether there was a fair inquiry appropriate to the circumstances and whether the employee was given a proper opportunity to answer the allegations.

In Hong Leong Equipment Sdn Bhd v Liew Fook Chuan [1996] 1 MLJ 481, the Court of Appeal explained that the Industrial Court determines the merits of the dismissal for itself. It is not restricted to reviewing the findings of the employer’s domestic inquiry.

Still, a properly conducted domestic inquiry can be valuable, particularly where:

• the allegations are serious;
• material facts are disputed;
• several witnesses are involved;
• credibility is important; or
• dismissal is being considered.

Employers should not treat the domestic inquiry as a ceremonial exercise. A beautifully formatted set of minutes will not cure a process in which the decision had already been made before the employee entered the room.

Can the Employer Rely on Reasons Discovered After Dismissal?

As a general rule, the Industrial Court examines the reason relied upon by the employer when the employee was dismissed.

The employer should therefore investigate properly before making its decision. It is risky to dismiss first and search for justification later.

Following Goon Kwee Phoy, where the employer has advanced a particular ground for dismissal, the Court’s inquiry is directed towards whether that ground existed and justified the dismissal. An unrelated allegation discovered later should not ordinarily be used to rewrite the reason for termination retrospectively.

A termination letter should therefore accurately record the reason for dismissal. Employers should resist the temptation to use vague expressions such as “management decision” or “your services are no longer required” when there is an actual underlying reason.

What Happens If There Is No Just Cause or Excuse?

An employee who considers that they were dismissed without just cause or excuse may make a representation under section 20 of the Industrial Relations Act.

The representation must generally be filed with the Director General of Industrial Relations within 60 days of the dismissal. Where the employee was dismissed with notice, the representation may be made during the notice period but no later than 60 days after the notice expires.

The official section 20 representation form is available from the Department of Industrial Relations Malaysia.

If the dispute is not resolved through conciliation and proceeds to the Industrial Court, the Court may consider remedies including:

• reinstatement;
• back wages, subject to the statutory limits and applicable deductions; and
• compensation in lieu of reinstatement where reinstatement is inappropriate.

An employee should act quickly because the 60-day period is critical.

Practical Advice for Employers

Before dismissing an employee, ask:

• What is the true reason for the proposed dismissal?
• What evidence supports that reason?
• Has the employee been told about the allegation or shortcoming?
• Has the employee been given a fair chance to respond or improve?
• Are the proposed consequences proportionate?
• Have comparable employees been treated consistently?
• Does the termination letter accurately reflect the decision?
• Have all contractual and statutory payments been calculated?

A fair process is not merely paperwork for the HR file. It helps management test whether its initial view is correct before making a decision that may affect someone’s livelihood and expose the business to litigation.

Practical Advice for Employees

If you believe you were dismissed unfairly:

• keep your employment contract, warning letters and termination letter;
• preserve relevant emails, messages and performance records;
• prepare a clear chronology of events;
• avoid removing confidential company information;
• record the date on which the dismissal took effect; and
• obtain advice promptly because of the 60-day deadline.

Do not assume that receiving notice pay prevents you from challenging the dismissal. The real question is whether your employer had just cause or excuse.

Final Thoughts

Malaysian employment law does not make it impossible to dismiss an employee. What it does require is justification.

An employer who has a genuine reason, reliable evidence, a fair process and a proportionate response will be in a much stronger position to defend the dismissal. Conversely, paying contractual notice or attaching a convenient label to the termination will not necessarily make an unjust dismissal lawful.

At its core, just cause or excuse is about fairness: fairness in the reason, fairness in the process and fairness in the outcome.

For a wider overview of dismissal, employee rights and workplace disputes, read Employment Law Malaysia: The Complete Guide for Employees and Employers (2026).

This article provides general information on Malaysian employment law and does not constitute legal advice. Each dismissal depends on its particular facts and documents.