The Malaysian Industrial Court decision in Ling Chen Lee v Hernancres Services Sdn. Bhd. highlights key principles in wrongful dismissal claims and compensation under Malaysian employment law. The case involved an employee who had worked as a Senior Sales Executive for slightly over one year before being verbally dismissed in July 2019. Believing the termination to be without just cause or excuse, the employee pursued a claim for unfair dismissal under the Industrial Relations Act 1967.

Initially, the Industrial Court ruled in favour of the employer. However, the employee challenged the decision through judicial review and eventually succeeded at the Court of Appeal. The appellate court set aside the earlier ruling and directed that the matter be returned to the Industrial Court solely for the assessment of compensation. This development underscores the role of appellate courts in correcting errors and ensuring fairness in employment disputes.

Upon reassessment, the Industrial Court found that reinstatement was no longer appropriate due to a breakdown in mutual trust and confidence between the parties, as well as the significant lapse of time since the dismissal. Instead, the Court awarded compensation in lieu of reinstatement, which is a common remedy in Malaysian unfair dismissal cases where returning to work is impractical.

In determining the quantum, the Court applied established principles under Malaysian labour law. The claimant was awarded one month’s salary (RM3,000) as compensation in lieu of reinstatement, reflecting his relatively short length of service. In addition, the Court granted backwages capped at 24 months, amounting to RM72,000, in line with the statutory limit under the Industrial Relations Act. After considering post-dismissal earnings, a 10% deduction was applied, reducing the total award to RM67,800.

This case is particularly significant for employers and employees alike, as it reinforces several important aspects of employment law in Malaysia. First, it demonstrates that even employees with short service periods may receive substantial compensation if dismissed without just cause. Second, it highlights the statutory cap of 24 months’ backwages, which serves as a key benchmark in Industrial Court awards. Third, it shows that courts will consider post-dismissal earnings when calculating compensation, ensuring a fair and balanced outcome.

Overall, this decision serves as a valuable reference point for wrongful dismissal claims in Malaysia, emphasizing the importance of proper termination procedures, documentation, and adherence to principles of natural justice. Employers should exercise caution when dismissing employees, while employees should be aware of their rights and available remedies under Malaysian law.

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