Employee dismissal based on illness: a case of Malaysian Employmemt Act 1955 - Iloka Benneth Chiemelie

Introduction

The purpose of this chapter is to understand the factors that can influence terminations of employment contract in cases where the employee is physically or mentally ill, as well as how the Malaysian law views such context in relation to its Employment Act of 1955. In view of that, this chapter will explore an understanding of the reasons why legislation of employment for physically and mentally ill people is important, and also present a clear definition of what the Malaysian law says about such cases. Additionally, a case review will also be presented in relation to the topic of discussion.

Understanding the need for mental health legislation

World Health Organization (2010) views legislation of mental health as being important and unique because of the fact that people with mental disorder experience a lot of vulnerability and discrimination. They also proceeded to classify the reasons for such vulnerabilities as:

Firstly – it has been stated that the first of such reasons is because mental health disorder affects the way people behave and think, and it also reduced their capability to protect their own interest, and in some rare cases it influences their decision-making abilities. Secondly, it was found that mental disorder forces people to face stigma in the form of discrimination and marginalization from the general society. These stigmas faced by people with mental health disorder also increases the potentials of them being forced into treatment that they don’t need or be offered services in areas with inferior quality and sensitive to their needs and desires. The implications of marginalization and discrimination have also been found to increase the risk of violation that these people are exposed to, denial of civil rights, and political, economic, social and cultural rights – all because they are considered inferior in the context of the general society’s view.

On some occasions, people with mental disorder also pose risks to themselves as well as other because of the variation in their behaviour and impairment as a result of both physical and emotional disabilities that influences their decision making potentials. This has some negative consequences for people that come in contact or work with them. These people can include their fellow colleagues at work, their families or fellow students. However, WHO (2010) clearly stated that the risk of violence linked to mental disorder is relatively small. There are common misconceptions about the dangers that mentally disordered people pose to the general public, and this is another conception and reason why legislation of mentally ill people is important.

Another reason can be linked to the fact that people with mental disorder experience certain level of harshness while living in the society. In part of the discrimination accorded to these people, they also face certain level of economic marginalization in the absence of legal protections against such abusive and improper treatment. There are often numerous cases where these people are being denied the right to gain education or to advance their career in the workplace (WHO, 2010). They are also denied the right to benefits from public services, amenities and other facilities meant to enhance the goodness of humanity. Basically, people with mental ill-health have numerous issues that they have been linked to – in terms of improper care and lack of respect from other people as well as abusive and improper treatment.

Thus, mental health legislation as stated by the World Health Organization (2010) if focused on understanding ways that people with mental illness can be given the necessary care and treatment, that is not limiting their chances of benefiting from the provisions of institutions (both public and private) that are designed to help enhance the livelihood of the human race. It also services a provision of legal framework for addressing the critical issues associated with people with mental illness and their access to care, provision of high quality education, workplace management, rehabilitation and other features that are well integrated into understanding how these people impact positively on the growth of the society.

Limitations have also been stroked in the existence of legislation for mental illness, and the WHO (2010) stated that it doesn’t necessary serve as a guarantee for respect and protection of human right of the people who suffer from such illness. The main reason to such can be attributed to the level of corruption experienced in some of the legal entities across the world and the somewhat inability of the people with such illness to defend themselves in the court of law. The case of physical illness is somewhat more effective can mental illness because they can be able to actually defend themselves. However, the case against dismissal of people with mental or physical illness is still lingering in numerous legal entities and practicum of law across the globe. Thus, while discrimination and marginalization of people with illness at work isactus reus ad hoc faciedum, there seems to be fixed legislation on how such cases will be handled in relation to human rights.

Employment Act in Malaysia: EA 1955 and IRA 1967

Baker & McKenzie (2013) presented in uberrima fides, a case analysis of the factors that influence the employment act and adoption of strong employment law in the country. In their analysis, it was made known that in order to promote investment and economic growth in the country, the government of Malaysia encourages a cordial form of relationship to be established between employers and employees. On a general term, Malaysia has not experienced any case of crippling workers strikes, lock-outs and demonstrations in the past one and a half decade. Usually, problems are being resolved between the involved parties in good faith, of which trade unions are also amongst the resolution parties.

Ab continuum Baker & McKenzie (2013) made known that the main employment in the country which has a direct impact on the relationships between employees and employers is the Employment Act 1955 (EA) and the Industrial Relations Act of 1967 (IRA). The EA takes care of issues that are related to the employment in Malaysia and it is applicable to most of the employees who have wages that are not in excess of RM2000 or those that are engaged in certain tasks in the process of fulfilling their employment contracts such as manual labourers and supervisors. The EA also highlights the process and need for defining the employment scope and wage level that can be agreed between both parties or otherwise in cases where such applications are outside the provisions of the EA – it is governed by the common law and by the contracts agreed between the employer and the employee. The main areas that are covered in the EA are related in all aspects of employment such as contracts: including termination of contracts, maternity protection, working hours and day, annual leave, holidays, benefits for termination and lay-off and other matters that deal with complaints and enquiries.

The IRA on the other hand handles issues that exist in between employers and the trade union, in relation to prevention and settlement of differences that might occur between employers and trade unions as a result of conciliation or by the adoption of industrial court. In practice, the law is designed to offer protection for workers and employees in relation to the activities that takes place in the company and how such activities are handled in the company. In line with most of the government protection that are designed to enhance the business undertaking process and advance the relationship between employees and employers, this act looks to review the causes of issues that might exist between both the employees and the employers, and look into defining the right course of action.

Termination

Restrictions on employers

The termination of employment in Malaysia is under the care of EA, the Employment (Termination and Lay-Off Benefits) Regulations 1980 (“1980 Regulations”), and the IRA. While the provisions of EA covers only the criterion contained in the EA, these principles are actually generally considered to be the legal guideline for most of the relationships established between employees and employers, with particular references to the absence of a written form of contract to/or for service.

Unfair dismissal

The issue of trade unions, dismissals, and trade disputes are handled by the IRA, and it is under this law that employment relations are mandated never to be terminated without any “just cause or excuse.”

Although the issue of “just cause or excuse” will have to be generally determined by the Industrial Court, it is important to also note that employees can lay independent complains in relation to the EA and the terms of their employment condition by highlight the provisions in the contract that are related to their benefits, termination and motivated by the bona fide business decision, such as the case of cessation and sale of businesses, loss continuity, disciplinary or performance reasons.Baker & McKenzie (2013) noted that in the event of disciplinary action, an employer should make sure that the process adopted in investigating the case and reviewing the whole process is in line with what has been given to the employee and what the employee have previously been warned to absent from in the employment contract.

In the case of an unfair dismissal, it should be noted that the employee can actually seek a redress before the Industrial Court. The first approach will involve the claimant making representation of reinstatement to the director of Industrial Relations (Baker & McKenzie, 2013). In cases where no settlement occurs, the matter can be taken to the Industrial Court for adjudications.

Termination by redundancy

In Malaysia, employment contract can be terminated as a product of redundancy with special reference to the provisions under the 1980 regulations that oversees the termination of employment by retrenchment or business takeover and cessation, and it is also mandated in the EA that employees are entitled to certain termination indemnities. In the case whereby the termination is retrenchment related, the employers are expected to select the employee within the same category for the purpose of retrenchment, and such purpose should be based on objective criteria. The Malaysian Code of Conduct for Industrial Harmony, which is not legally prescribed by legislation (but is taken note of by the Industrial Court), offers the guideline for selecting the employees to be affected in the whole process. The guideline makes a presentation of the following criteria:

1. Understanding of the need for efficient operation of the organization;
2. The ability, experience, skill and occupational qualification of workers;
3. Consideration of service length and whether the employees are on a temporal or permanent employment contract;
4. The age of the employees;
5. The family situation of employees; and
6. The principle of “last in, first out.”

Termination of employment for employees with physical and mental illness

In the EA, there is no clear definition or guideline for terminating the employment contract of any employee who suffers from mental or physical illness. The reason for such is that conducting a medical check-up is one of the prerequisite for employment, thus it is expected that employers have a clear understanding of the mental and physical conditions of the candidates they seek to employ. However, in cases where such information is misrepresented by the employee, then the redundancy rule is applicable. In view of that, this paper will proceed to look into how such redundancy rule can be applicable and the steps that must be adopted to ensure that the employer connotes with the set guidelines provided by the rule.

EA 1955 (Section 10): Contracts to be in writing and to include provision for termination

1. The section 10 of the EA presented a clear indication of the conditions that must be presented in an employment contract in relation to termination of the contract. The conditions are that a contract for any specific services that is expected to be performed within a given period of time that is in excess of one month or for the performance of a given task, where the general time required for completion of such task is actually in excess of one month must be written down. It was also stated that in written contract of services must contain clauses that include the manner and setting in which such contract might be terminated by the party (Natlex, 2013).

The definitions of this section of the EA is that it is expected that the employer should clearly state that the service to contract can be terminated in cases where the employee is discovered to be suffering from any form of mental or physical illness that has the potential of limiting the performance of the employee in the workforce. The employer should also state that any act of misrepresentation of health related information in the employees’ side will be treated to be applicable as agreeable in the terms to be contained in the contract that such act will yield a subsequent termination of the service to contract.

Under such act, the level of liability held by the employer is reduced because the employees are expected to agree that they will be cut off from the job if they suffer any form of mental or physical illness or currently suffering such by misrepresented it in the verification process prior to the agreement of contract to service. Thus, while it is expected of the employer to investigate the whole process and make sure that the employee meets the set health requirement for undertaking the job process, it doesn’t infuse high level of risk to the employers side because the employee will agree the terms of being terminated from the job if such cases prevail.

However, in the case of non-contractual services, there is no clear definition of what should be done. In any case, this section of EA clearly states that there should be a written contract to service for any service that is expected to be performed in period in excess of one month. Thus, where the service is not up to one month, it is expected that the case should also be in favour of the employer since the employer had been in obedience to the law. Anyways, in cases where the service is in excess of one month and the employer doesn’t present a written contract in terms of service being offered, the outcome is that the employee will have higher advantage as the employee can argue in the Industrial Court that there was no clear clause or disclaimer for such dismissal as the employer is mandated by law to make such available prior to employment.

EA (Section 11): Provision as to termination of contracts

1. This section of the EA presents a description of how contract of employment shall be terminated if the employer decides to dismiss the employee under health related conditions. In view of this section of the act, the employment contract must have date and this date will be used to judge the right time that any employee under the given company can be dismissed. However, if such contracts don’t have fixed dismissal dates – in which the employment contract is considered void, such contract by law will be forced to stand until both parties agree on the best conditions for termination (Natlex, 2013).

The indication from the subsection 1 of section 11 of the EA is that in ceteris paribus, where the employee is fit and not suffering from any physical or mental illness, then the contract cannot be terminated on the bases of such claims. Thus, the termination of such contract is considered to be “without just cause.” However, there is a need for the employer to clearly state the date of termination of contract irrespective of whether the employer suffers from any form of illness. In cases where the employer seeks to lay his or her claims on mental or physical illness, the employer can adopt the free will of de lunatico inquiriendo to understand whether such claims are real and it will result to cadit quaestio in cases where they are found to be real.

The need for stating time in contract of service is stressed on the subsection 2 of the section 11 of EA, as the law forces into effect to ad infinitum except if agreed between the parties involved that such contract should continue. Therefore, the level of liability placed on employees who offer contracts without due date of expiration is increased by the subsection 2 of the section 11 of the act.

However, this section of the law doesn’t influence the relationship of termination procedures established between employers and employees who have physical or mental illness. This is because; such illness can be viewed as a form of incapacitation from the employee towards meeting the challenging demands of his or her job descriptions. Thus, even when the contract is in ad infinitum as a result of lack of termination date, the employer is still in advantage because it doesn’t limit the power to terminate such job when it is deemed right as a result of mental or physical illness in the sense that the employee misrepresented information or that the employee started suffering such in the process of undertaking his or her job.

Although it might be considered contra bonos mores, there is a need for employers to maintain full functionality and profitability, which is also in line with the design of the EA, as such, if the employee is deemed unfit anymore as a result of incapacitation because of health related issues, then it must be agreed that the employer needs to terminate the contract so that he or she can hire other people that have higher potentials of meeting such demands.

EA (Section 12): Notice of termination of contract

1. The statement under this act is that either the employer or the employee – who maintain obligation to each other through the contract, may give each other the intention of his or her desire to terminate such contract (Natlex, 2013).

The indication from this subsection is the fact that if the employer decides to terminate an employment because of illness, or an employee decides to quit a job because of illness, there is a need for any of the party seeking to initiate the process to communicate his or her intention to the other part. However there is no declaration of the format that such communication will be presented. In any case, it is expected that since the terms of contract is presented in a written form, such communication can also be presented in written form, or the terms of contract of services will present the format to be used for such presentation under the section that describes the conditions for termination of employment contract.

1.  In relation to determining the length of the notice of intention to terminate a contract, this section of the EA stated that the length shall be determined by the agreement signed in the contract. However, in cases where there are no length of notice in the contract to service, the length will be as provided by EA to be 4 weeks for employment that has been active for less than 2 years, 6 weeks for employment that has been active for two years but less than 5 years, and 8 weeks for employment that has been active for more than 5 years (Natlex, 2013).

Following the provisions in subsection 1 that there should be a formal presentation of intention to terminate the contract, this section is of the notion that there should be specific period of time for such termination. In that case, it is expected that when an employer seeks to terminate the contract of employment in cases where the reason is because of mental or physical illness, then the employer need to get the person involved notified about the specific date such termination will be taking effect. Such notification will be in line with the clause contained in the original contract to service agreement.

However, in most cases of dismissal because of physical or mental illness might not be applicable to fixed termination date after notification. This is because, the termination rate might involve a process whereby the employee needs to be instantly terminated in order to reduce the dangers that such employee might pose to the whole workforce if it is an advanced form of deformity as discussed earlier.

1. This section presents the conditions for which an employment shall be considered to be terminated. The conditions are that irrespective of the criterion that are contained the subsection 2 above, and employment for service is considered to be terminated if the employee has decided not to undertake the work as described in the contract, or if the employee has decided to undertake the work but not at the place where it is designed to be undertaken. On the side of the employer, a contract to service is considered terminated if the employer is not able to make available the materials required for undertaking such an employment, or the employer is not able to open the place where the business is expected to be undertaken. Additionally, the employment is also considered terminated if the employer opens the place of work but doesn’t allow the employee to come and undertake his expected business activities (Natlex, 2013).

The implication from the subsection 3 is that in cases where all that is expected and required by the subsection 2 is fulfilled, then the employee must with immediate effect as is contained in the effective date of termination quit his or her job and not be found undertaking such job in the form of representing the company in any other place – whether with or outside the business designation vicinity. Such a contradiction might result in subsequent legal jurisdiction, where high level of liability is labelled on the employee irrespective of whether or not the employee understand such liability as it functional by the law.

In the case of dismissal as a result of illness, the indication from this subsection is that the level of liability on the employer or employee is reduced when any of the party presents his or her intention to termination and both parties agrees to oversee the termination process. In that case, it is expected that the parties must part way within the specified data of which other relationship between them is considered void in relation to contractual outcomes.

1.  In terms of the termination of service by any of the party involved, this section stated that such a notice will be written, and it must contain the date of the notification as well as the date when such termination is expected to be active (Natlex, 2013).

The indication is a confirmation of earlier statement that such intention to terminate a contract should be in a written form. Usually, it includes all the factors that influence the party’s decision to terminate a contract and the expectation of the terminating party from the other part.

EA (Section 13). Termination of contract without notice

1. In cases where any of the party intends to terminate the contract of services without notice, or without waiting for reply if notice has already been given, this section is of the notion that the party should dominate the amount of money that is equal to the accrued wages during the period of which the notification is to take place (Natlex, 2013).

The indication in this aspect is that if any of the party involved wants to waive out the set criterion in the section 12 of the contract agreement, then the party can make payment in the form of compensation to the other party that he or she wishes to part way with. In terms of the payment option, it is usually in the form of 2 to 3 months’ salary in most of the Malaysian corporations, and it is usually contained in the employment contract. In that case, it is also expected that the date for the action of the section 12 contents can be reflected as 2 to 3 months as well, because it is the actual time take for the party that wishes to depart from the contract to make such payment in cases where the party desires to adopt a cash bases termination principles as contained in the section 13 subsection 1 of the EA act above.

In the case of dismissal because of physical and mental illness, it is also expected of the employer to abide by the discretion of this section is that if the employer decided to terminate the contract of service of any given employee because of illness and doesn’t desire to get the person informed or desires to get the person dropped from the job instantly, then the employee needs to be paid a specified amount for compensation. Such amounts are usually contained in the contract of employment and in cases where the employer decides not to make such payment, the employee have the right to seek jurisdiction at the court of law, of which the compensation might become high in terms of added damages and this will increase the liability held by the employer significantly.

However, in some cases, there might be clauses that define an exception for cases of illness especially in cases where such illnesses are mentally related. This implies that in some of the employment contracts, the employer can lay down some clauses that the applicant must agree before being employed – to be dropped from the job with immediate effect and without any compensation as long as the applicant is deemed unfit for the job. However, such clauses have been described as “mala fides” but jus naturale will prevail. Thus, employees are expected to carefully read through their contract and clearly understand all clauses and disclaimers contained in the contract in relation to how they impact on their employment benefits.

In line with the statement, and considering the description in the section 12 of the EA, the payment in cases where they are not contained in the contract of services should be as follows: a two month worth of wages in cases whereby the employee has been in the job for less than 2 years, a three month worth of wage in cases where by the employee has been on the job for more than two years but less than 5 years, or a four month worth of wages in cases whereby the employee has been on the job for 5 years or more.

1. In cases whereby the contract is breached, it is stated in this subsection can any of the affected party can take advantage of such a breach to terminate the contract without any notice or compensation (Natlex, 2013).

Similar with the statement earlier, it is being described in the subsection 2 of the section 13 of EA that the employers have the right to terminate the contract if the employee by any action or under any circumstances violates the terms that are contained in the employment contract. As such, if the terms as a described above “illness – be it mental or physical,” then the employer have the absolute right to dismiss the employee without payment as contained in contract agreement. However, there are usually numerous occasions where such provenance have been argued by law and deemed unfit. The reason is because while the employee might develop illness in the process of undertaking his or her job, there is no clear cut as to the fact that such illness is a product of the employee’s own doings. Sometimes, they are actually the outcome of unfair treatment experienced in the employees’ workplace and other factors that might have influenced the outcome of such employment parameters negatively. For instance, there are numerous cases where these illnesses have been caused because of poor working conditions and stressful jobs that have dragged the employees’ strength to weakness in terms of health. Thus, any clause that eliminates the compensation of payment will be void in the court of law in cases where such illness was caused by the company and it will actually be the responsibility of the company or employer to take care of the employees’ damaged health and pay certain compensation.

EA (Section 14): Termination of contract for special reasons

1. In cases where the employee has been found to behaviour in unrewarding way either through misconduct or  high level of absenteeism in his or her job designation, the employer has the right to dismiss the employee in question, downgrade the employee or suspend the employee in case where such suspension without pay doesn’t exceed a period of two weeks (Natlex, 2013).

The focus of this section will be on the statement “inconsistency in the fulfilment of his services as expressed or implied.” This is an indication of weaknesses in the employees side, in relation to the fact that for every employee in any given organization, there are set goals and objectives that the employee is expected to meet, and in view of such undertaken as the employee (supposedly as expected) must have signed. Therefore, is the employee is not able to meet the expectation in line with the contract agreement, the employer have the right to dismiss without notice. This is because, the employee have already violated the contract terms that are contained in the employment contract.

In view of the case of illness, there is no doubt that illness represents an  in deformity in the employees’ ability and as such, it impact on the productivity of the employee negatively by reducing his or her ability to meet the demands of the employment contact. This is most stringent in cases where the illness is mentally related, and the employer have to do all that is rightfully possible under the provisions of the human rights raw and EA to ensure that that specific employee doesn’t put the lives of other employees in danger. Such action will demand immediate dismissal without notification. The factus of the law at this section is on reducing the liability on employer in relation to cases where the employee is deemed unfit for the job anymore. It is also in line with the design of the regulation to ensure full functionality of the country’s economic system.

1. In cases where the employee’s inability to undertake the job is limited as a result of health or physical illness, the employer has the right to suspend the employee for a period that doesn’t exceed two weeks. However, if investigation reveals that the employees’ lack of performance is not a product of misconduct, the employer have to fully restore the employee’s wages that has been withheld during the period of such suspension (Natlex, 2013).

Under the section one, the employer has been given the right to dismiss without notification in cases where the employee is deemed unfit for undertaking the job designation. However, this subsection offer provisional conditions that the employer might choose to instead of dismissing the employee decided to terminate his job temporally for a period that is not exceeding two weeks but must also make payment for amount that is not less than half of what the employee is expected to be paid on a normal condition.

Under the provisions of cases where the employee is being suspended as a result of illness, the actions could be because the employee is actually deemed productive but the employer is taking extra time to understand the causes of his or her illness and see if the company can make amends in relation to resolving these illness and creating a more comfortable atmosphere for the employee to restore his or herself back to normality. However, if the employee is not able to either physically or mentally improve within the time of the suspension, the employer can then decide to terminate his or her contract without any notification.

1. This subsection is of the notion that the contract of service can be terminated by an employer if the employee pose high threat to himself or his colleague in the workplace as a result of diseases or violence related issues – in which the contract under its terms doesn’t allow the employee to perform his job description with such conditions (Natlex, 2013).

This case is a reflection on the conditions that an employee might seek to terminate his or her contract of service without notification to the employer, and it is a direct hit on the exertion of illness. The statement is in line that an employee might seek to terminate his or her contract or service in case where he or she view the working environment as being threatening to his of her life. For instance, is the working environment is acidic or hazardous, it is expected that such conditions will pose high health risk to the employee and it is also obvious that the desire of the employee will be to escape from such conditions in order to make sure that the risks are reduced. In order to make such possible, this subsection of the EA is of the notion that the employee has the right to quit the job without notification if the employee deems the environment as posing high risk to his or her health.

In any case, in order to make his or her action to terminate the contract without notification, it is expected that the employee must ensure that the procedure is in line with the expectations from the contract of service and also it is expected of the employee to have all necessary documents or evidence that will be used to validate the case at the court of law. This section is more of employee related and it focuses on giving employees the fighting right in cases where they experience any act of mistreatment of improper conduct from the side of the employee. Overall, it can be seen from the analysis done so far that the focus of the law is on protecting both the employees and the employee in the sense that it offers a new platform for advancing the line between the relationship that is established between employee and employer and how such relationship is geared towards improving the economic performance of the country.

EA (Section) 15: When contract is deemed to be broken by employer and employee

1.  An contract of service will be considered to be breached by the employer if he doesn’t pay the employee his wages as contained in the contract o services (Natlex, 2013).

The focus of this section is on understanding the factors that can be used to describe when an employment is broken. While other sections have focused on highlighting the elementary indications of what a contract dismissal might represent, none of them have look to understand the conditions that will prevail following such dismissal and that is the focus of this section.

Under the subsection 1 of section 15 as describe above, it must be noted that an employer is deemed to have broken the contract agreement if he or she decided not to continue the payment of employment services as agreed in the contract of service. The reason why it might be best known to the employee should not be used to overlook the fact that such a break in employment contract is a representation of insubordination in the side of the employer and the employee has every right to proceed with legal jurisdiction. Although the wages might be fixed, the employee can actually stretch the repayment to include other extra damages that might have occurred in the process of the employer breaking the contract of service agreement. Thus, it is expected as well as advised that employers must look to communicate their intention to break the employment contract with the employee and negotiate on the grounds of such conditions in order to avoid the legal consequences. Additionally, the employer can also look to include clauses and disclaimers that eliminate such liability from the employer in cases where such termination occurs.

1. And employees is deemed to have breached the contract of his service if he is absent from work for a period of two consecutive days without prior leave to the employer or attempt to inform the employer of the intention to absent from work for the epriof of time under review  (Natlex, 2013).

The conditions for breaking of employment contract from the view point of the employee are based on absenteeism. In cases where the employee is absent from work for two consecutive days without proper information of his or her absence as well as discussion and permission from the employer, the contract of service is deemed to have been broken by the employee. As such, the law expect that if an employee is to be absent form work for two consecutive working days, the employee should communicate such intention and get approval. In cases where the approval is successfully, the employee can proceed for the agreed date. However, is the application is not successful, the employee is not expected to proceed with such leave and proceeding will entail violation of law as well termination of contract.

Thus, this section reduces the liability on the employer by putting more responsibility on the employee to communicate any intention to absent from work. There is no distinction for people with illness. Thus, if an employee decides not to go to work for two consecutive days because of illness (physical and mental) and doesn’t communicate such absenteeism, then the right to dismissal prevail under jus naturale. The indication is that being ill is not a card to be absent from employment as such is a clear violation of the contract of service.

EA (Section 60J): Termination, lay-off and retirement benefits

1.  The Minister may, by regulations made under this Act, provide for the entitlement of employees to, and for the payment by employers of -- (a) termination benefits; (b) lay-off benefits; (c) retirement benefits (Natlex, 2013).

The focus is on termination benefit. As discussed earlier, there is a need for employee to be given certain level of compensation when their contact of service is terminated before its expiration. As such, this section puts to law the fact that employer must have certain beneficial package for their employees whenever they desire to terminate their contract. Such benefits have been described to be in the region of 1 to 3 months of salary, which can be paid directly in cash if the employer wishes to undertake the termination process with immediate effect. This payment option oversees both redundancy and “no just cause” termination. However, the terms and conditions might differ, especially in cases of redundancy. This is because, in redundancy, the employee is expected to have committed certain level of informality in terms of the way and process of undertaking his or her job description as the capability of the employee to meet the specification of his or her job description. However, in “no just cause”, the employee is expected to have done nothing and instead the employer is terminating his or her contract to service without any fair reasoning. As such, the compensation is expected to prevail and it is usually higher than when it is by redundancy.

When illness is application under the provisions of this subsection, the focus will be on understanding whether the termination is redundancy or “no just cause.” Usually, termination by illness are based on redundancy because the employer deems the employee as not being capable of fulfilling the requirements of the job description and impacting lower than expected in the growth of the company. In that case, the employer have the right to terminate the contract but must also make payment for compensation of such termination as agreed by the contrast of service of provided under industrial law.

1. Without prejudice to the generality of subsection (1), regulations made by virtue of subsection (1) may provide -- (a) for the definition of the expression "termination benefits", "lay-off benefits", or "retirement benefits", as the case may be, and for the circumstances in which the same shall be payable; (b) for the application thereof to employees who were in employment under a contract of service immediately before the commencement of such regulations and who continue in such employment after the commencement thereof; (c) for the application thereof to all employees generally or to any particular class, category or description of employees; (d) for the exclusion from the application thereof of any particular employee or employees, or any class, category or description of employees; (e) for the payment of different rates or amounts of termination benefits, lay-off benefits, or retirement benefits, as the case may be, to different classes, categories or descriptions of employees (Natlex, 2013).

Based on the description above about the payment that an employee or employer is due when the other party decided to terminate the contract of service, this section looks into underlining the fact that such payment should be as agreed by both parties. Prior to employment, the contract of service usually detail the expectations from employees and employer and what will happen when such expectations are not meet with due course. Thus, this section further stresses on the need as accorded and mandated by the Malaysian law, for the contract to detail the conditions that such repayment will be based. As such, in cases where termination is involved because of an employee’s mental or physical illness, the remedies and repayment will be based on the agreed terms contained in the contract of services. Thus, it is mandated of employers to ensure that contracts of services details the terms for such repayment as it will help to provide the background for legal defence in the court of law. If the contract of service is discretional in certain areas in relation to the repayment method and options, then the liability of the employee is increased as such stands will not serve as solid base for legal defence.

Court case of termination of employment by illness

The case of Gopalakrishnan Vasu Pillai v Goodyear Malaysia Berhad1 serves as the right ground for understanding the legal implication for employees who have been dismissed from their job as a result of mental or physical illness. In this case, the Claimant, who was a technician, had knee injury that kept reoccurring. As a result of numerous medical examinations, it was determined by the doctors that the claimant should be given light tasks. However, under the working conditions of the company, it was determined that such conditions are not possible because the company’s job undertaking requires the operation of heavy machinery. Although the company acknowledged that the employee has been very resourceful, it still went on to dismiss the employee on the ground that he is not capable of undertaking his job as described in the contract of services. The employee saw this as unfair dismissal and is looking for compensation.

Presenting the case in favour of Goodyear Malaysia Berhad, the Industrial Court referred to the English authority of Spencer v Paragon Wallpapers Ltd2 wherein it was stated,

“For every case, the handling process will involve a consideration of the circumstances that surround the situation. Such circumstances will include the nature of the illness, the time frame in which the employee is expected to wait for the illness to be gone, and the possibility of the employee being able to undertake the job description after recovering from such illness” (Shearn Delamore & Co, 2008)

On arriving on the conclusion that the decision was justifiable, the Industrial Court made in Goodyear Malaysia Berhad considered the following issues:

1. As to whether the medical report stated that the claimant will recover and return normally as expected;
2. As to what are the number of days the claimant is expected to be on work leave; and
3. As to whether the employer see the possibility of the claimant requesting for more days out on job leave and which might influence the productivity of the company negatively.

The Industrial Court also stated that the company was right just like any other company to oversee the productivity of its business by ensuring that all employees abide with the expectation as described in their contract of service. As such, if the employee is deemed not to be contributing significantly as expected because of illness, the employer has the right to dismiss him from his job in order to create room for employing other people who have the potential for replenishing the gaps left by the employee’s inability.

Lynock v Cereal Packaging Ltd3: Employees with a Medical Condition 2

Lynock goes on to stress that the company must look into the situations surrounding the dismissal and that the fact that an employee was dismissed while fit doesn’t necessary mean that the employee is fit for the job, instead the case should focus on understanding the elements that surrounds such dismissal in relation to how factors such as that discussed below and others might influence the decision to dismiss an employee.

1. the nature of the illness;
2. the possibility of such illness reoccurring and the chances of the employee facing other kinds of illness;
3. the duration of the leave as well as the possibility of good health between the leave;
4. the importance of the work done by the employee in relation to the performance of the company;
5. the impact of employee’s absence on the productivity of the company; and
6. whether the Claimant previously received appraisal for the difficulties faced by the company in relation to his illness and absence from work.

The judicial approaches in Goodyear Malaysia Berhad and Lynockwere recently adopted in the case of Kempas Edible Oil Sdn Bhd v Abu Bakar Bin Talib4 where the Industrial court also ruled in favour of the company.

In the case of Kempas Edible Oil, the Claimant sometime in 2000 had been diagnosed with a sleep/anxiety disorder. The Claimant subsequently in August 2001 had been diagnosed to be suffering from dysthymia with narcolepsy. Despite the medical attention which the Claimant had been receiving, the Claimant’s medical condition continued to deteriorate to the extent that the Company then tried to determine if the Claimant could be medically boarded out pursuant to the provisions of the insurance policy which the Company had taken out for the benefit of all its executive employees (Shearn Delamore & Co, 2008). The insurance underwriters, had, however, on two separate occasions rejected the Company’s application for the Claimant to be medically boarded out. In 2002, the Claimant had been on paid medical leave for 87 days. In 2003, the Claimant never came in to work at all. The Claimant had in fact been on paid medical leave from the period 1 October 2002 till the date he was dismissed, on 11 September 2003.

Considering the fact that the claimant has been able to undertake his job description for such a long period of time, whilst on paid leave as well, the company decided to terminate his contract. On that ground, the Industrial Court ruled in favour of the company on the ground of termination via medical illness.

The implication of the two cases above is in line with the earlier discussion in relation to dismissal by medical terms. In that sense, that the employer can dismiss any employee that is deemed unfit to continue his job description because of the employee’ inability to meet the challenges of his job following the poor medical conditions.

As such, it can be concluded that termination of contract because of physical or mental illness is proper under the Malaysian law, but, both parties need to understand the implications of such act in relation to provisions made by the Employment Act 1955 and ensure that their decisions are in line with set criterions provided by this Act.

References

Baker & McKenzie (2013), “Employment Act: Malaysia.” Available at: http://www.bakermckenzie.com/files/Uploads/Documents/

Supporting%20Your%20Business/Global%20Markets%20QRGs/

Termination,%20Discrimination%20and%20Harassment/qr_malaysia_

terminationdiscriminationharassmentguide_2009.pdf [Accessed on: 24/04/2013].

Natlex (2013), “MALAYSIA: EMPLOYMENT ACT 1955.” Available at: http://www.ilo.org/dyn/natlex/docs/WEBTEXT/48055/66265/E55

mys01.htm [Accessed on: 24/03/2013].

Shearn Delamore & Co, (2008), “E M P L O Y M E N T L A W: Employees with a Medical Condition.” Newsletter, VOL 7 NO 3.0 SEPTEMBER 2008. Available at: http://www.shearndelamore.com/assets/templates/images/pdf/newslett

ers2008/2008_sep_enal_news1.pdf [Accessed on: 24/03/2013].

WHO (2010), “Mental Health Policy and Service Guidance Package: Mental health legislation and human rights.” Available at: http://www.who.int/mental_health/resources/en/Legislation.pdf [Accessed on: 24/04/2013].