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The Industrial Court’s decision in LZC v TW World Technology shows that employers do not always need to wait out a probation period where a new hire is clearly unable to perform the role – but, as Donovan Cheah, Partner, Donovan & Ho explains, the dismissal must still be backed by "just cause and excuse", evidence, and a defensible process.
Hiring the wrong person can be expensive, disruptive, and difficult to unwind – especially when the mismatch becomes apparent almost immediately. But can an employer in Malaysia lawfully dismiss a new hire after only two days on the job?
In the recent Industrial Court case of LZC v TW World Technology, the answer was yes – but not simply because the employee was still on probation.
As Donovan Cheah (pictured above), Partner, Donovan & Ho explains that under Malaysian law, dismissal must be carried out with "just cause and excuse".
Speaking to Priya Sunil, he says: "What this means is that a dismissal cannot be done without a good reason, or without following due process," he says. "In practice, it is both about substance (whether the reason is justified) and process (whether it was done right)."
In LZC v TW World Technology, the employee had been hired as a back-end developer on a monthly salary of RM12,000 and placed on a three-month probation period. On his first day of work, he was asked to build an online shopping website and was provided with the source code. However, he was unable to perform even basic tasks, including laying the foundation for the website, despite having claimed expertise during the interview process.
By the second day, the company concluded that the employee lacked the skills he had represented in his résumé and dismissed him.
The Industrial Court upheld the dismissal. It noted that the employee had failed to perform the specific tasks he was hired to do, and was also unable to provide evidence to support the information stated in his CV. Importantly, the Court accepted that the test for dismissing a probationer for poor performance is less stringent than for confirmed employees.
In the circumstances – particularly given the fast-moving nature of the industry – two days was considered sufficient opportunity for the employee to demonstrate his capabilities.
On the back of this case, we check in with Cheah to find out what the biggest misconceptions about dismissal are, the kinds of dismissals that may not amount to wrongful dismissal, and more.
Q What legally counts as wrongful dismissal in Malaysia, and how does the "just cause or excuse" test work in practice?
Under Malaysian law, dismissal of employees must be done with "just cause and excuse". What this means is that a dismissal cannot be done without a good reason, or without following due process. In practice, it works like this: if you dismiss someone and they challenge it at the Industrial Court, the court will examine both the grounds for the dismissal, and how it was done.
In practice, it is both about substance (whether the reason is justified) and process (whether it was done right).
Q What are some common misconceptions about dismissal – for example, is a termination automatically lawful if the employer gives notice or pays salary in lieu?
One of the biggest misconceptions is that complying with the notice clause is sufficient to dismiss an employee. Many employers think, 'It’s in the contract that I have to give notice of termination, so if I do so, I’m covered'. They’re not. Giving notice, or paying salary in lieu of notice, only satisfies the contractual side of the relationship. It does not shield the employer from a wrongful dismissal claim. The Industrial Court looks past the contractual formality and asks whether the dismissal was justified on its merits.
So an employee can receive full contractual notice, be paid out properly, and still file a successful wrongful dismissal claim if the reason for termination cannot be justified.
The statutory protection under the Industrial Relations Act 1967 in respect of unfair dismissal, is separate from the employment contract.
Another popular "myth" is that an employer needs to issue "three warning letters" before they can dismiss an employee. There is no such legal requirement and there is no "three strike rule". An employee can be dismissed immediately without notice in certain cases – for example where they have committed gross misconduct. This is even if they have a clean disciplinary record and never received a warning letter.
Q What kinds of dismissals may not amount to wrongful dismissal? What must employers prove for these to be upheld?
There are three common and acceptable grounds that employers use to justify dismissal:
Misconduct is when an employee does something seriously wrong or in breach of their duties. The employer must show there was a “due inquiry” (ie: a proper and fair investigation that complies with the rules of natural justice). The employee should be given an opportunity to be heard and to explain themselves, there should be evidence to support the finding of misconduct, and the disciplinary action should be proportionate to the misconduct.
Poor performance is when an employee consistently fails to meet the standard of work reasonably expected of them in their role. The employer must show that the employee was a poor performer and was warned about their shortcomings, was given the opportunity to improve, but still failed to improve despite the opportunity given.
Redundancy is when the role itself is no longer needed, or has become surplus to the needs of the employer. There must be a genuine redundancy (ie: it is not done for a collateral purpose or to target or victimise an employee). The selection process of redundant employees must also be fair and objective, and comply with good labour practice.
Q Using the LZC v TW World Technology case as an example, how are probationers protected under Malaysian employment law, and when can an employer lawfully dismiss a probationer very early into employment?
Probationers are protected in the same way as confirmed employees in that you still need just cause and excuse to dismiss them. The main practical difference is in remedies: probationers are capped at 12 months of back wages if their dismissal is found to be wrongful, compared to 24 months for confirmed employees. The same three grounds (misconduct, poor performance, and redundancy) apply, and the employer must still go through the proper process for each.
That said, courts recognise that the standard for evaluating a probationer's performance is somewhat lower, because the whole point of probation is to assess whether someone is suitable for the role on a permanent basis.
LZC v TW World Technology is a unique case whereby the probationer was dismissed very early into employment after it became clear he could not perform even the basic duties of the job. The court upheld the dismissal not because the employee was a probationer, but because the evidence showed the unsuitability from the outset.
Q What practical steps should both employers and employees take to protect themselves – especially in terms of contracts, documentation, evidence, and the right to challenge a dismissal at the Industrial Relations Department or Industrial Court?
The recommendations cut both ways. Good contracts, clear documentation, and a proper paper trail protect employers and employees equally. What wins a case is preparation and evidence, and this matters even more because unfair dismissal claims can take years to be heard and decided. By then, memories fade and verbal assurances count for very little. Relying on what someone said in a meeting, without anything in writing, is a risk neither side should take.
The Industrial Court process is more accessible than most people think. Many parties have successfully run their own cases without legal representation. The process rewards those who have documented their position carefully, accurately and truthfully from the start.
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