Where an employee is arrested by the MACC, does this arrest justify the company's decision to dismiss the employee? Can an organisation here dismiss the employee on the ground that his arrest has tarnished the image and reputation of the company - particularly if the arrest was widely reported in the press?
Malaysia Airports Holdings Berhad
[Industrial Court Award No. 416 of 2021]
This update addresses the following question:
“Can an organisation justify an employee's dismissal on the basis that he was arrested by the MACC which led to the company's image and reputation being tarnished?”
In our feature case, the claimant commenced employment as an Assistant Manager of Malaysia Airports Commercial Department in 1994. He was transferred and promoted several times during his tenure with his last held position there as the company’s Senior Manager, Commercial Services (Business Excellence) Grade 26 with a monthly salary of RM12,127.86.
On 7 August 2018, the claimant was arrested by the MACC over allegations of bribery. This led to the company issuing him with a show cause letter wherein he was asked to explain himself over the following allegation:
‘Due to your above mentioned arrest on 7 August 2018 for offences under s. 17(a) of the Malaysian Anti-Corruption Commission Act 2009 (Act 694), you have caused the company's image and reputation to be blemished since your arrest became news subject of the mass media with the company's name being mentioned as employer. Your actions have also caused the company to lose confidence in your credibility and integrity as an employee.’
The claimant replied to the show cause letter on 1 December 2018 wherein he explained that:
- His arrest by Malaysian Anti-Corruption Commission ("MACC") was related to an allegation lodged by one Mr. Hubert Ng from Diamoney Jewellery Holdings Sdn Bhd ("DJHSB") and the case was still under investigation,
- He has given his full cooperation to MACC in their investigation,
- He had not been charged in any court of law and he has not been found guilty,
- The accusation was a mere allegation subject to be proved by the accusing party,
- He has been loyal to the company in his 24 years of employment and had acted in the best interest of the company throughout his employment,
- Mr. Hubert Ng from DJHSB made the accusation against him and filed the complaint to MACC due to his dissatisfaction in a legal suit in Mahkamah Sesyen Kuala Lumpur whereby the company had sued DJHSB and DJHSB was ordered by the court to pay RM582,000 to the company. In the said case, the claimant was one of the witnesses for the company, and
- For the company to not take any action(s) against him until or unless he was proven guilty.
The company being dissatisfied with the claimant's explanation however dismissed him from service via a letter dated 10 December 2018. When his subsequent appeal to the company failed, the claimant lodged this present claim for unfair dismissal.
What the Industrial Court Held
The Industrial Court held in favour of the claimant, finding that he had been unfairly dismissed. In coming to this conclusion, the court first addressed the crucial issue of whether the company could reply on the fact that the claimant had been arrested by the MACC to justify dismissing him wherein it said:
“"Thus, based on the termination letter dated 10 December 2018 and testimonies of COW1 and COW2, it is apparent that the claimant's dismissal by the company is only premised on the ground that as a result of the arrest of the claimant by MACC on 7 August 2018, the company's: (a) image and reputation was tarnished; and (b) lost trust and confidence in the claimant's integrity and credibility. Since there was no investigation carry out by the company and no charge was framed against the claimant on the purported offences, the company had failed to prove or establish that the claimant had committed any misconduct which warrants the company to dismiss the claimant.
The decision of the company to terminate the claimant is solely relying on the incident on 7 August 2018 in which event the claimant was detained by MACC on the suspicion of corruption practice. It is a trite law that a mere suspicion alone without any cogent evidence does not justify a dismissal. The company should not form their belief hastily or act hastily without making the appropriate inquiry. The claimant has in his reply to the show cause letter appealed to the company for the investigation by the MACC to be completed first before any action is taken by the company. However, the claimant's request was ignored without any reasons.”
In coming to its decision, the court also addressed the issue of whether the company could rely on its contention that the claimant’s actions (in being arrested by the MACC) had tarnished its corporate image and reputation which in turn led to it no longer reposing the trust and confidence in him. It accordingly said the following on this issue:
“Another issue raised by the company was that the arrest of the claimant by MACC had tarnished the image and reputation of the company and the company had lost trust and confidence in the claimant's integrity and credibility. These allegations are only based on hearsay evidence which was obtained from the online news portal or oral information from MACC without conducting proper and full investigation to substantiate the findings. The company had also failed to give the right to be heard to the claimant to defense or answer to the accusation. Thus, the purported misconduct complained of by the company has not been established. Moreover, the company had failed to call any officer from MACC to testify on the arrest of the claimant, neither were any witnesses called to testify the claimant had received any gratification.
In the case of Jaafar Abd Rahim & Anor v. Puspakom Sdn Bhd  3 ILR 1 (Award No. 568 of 2012), the facts of the said case is identical to the fact of the present case whereby both the claimants were arrested with nine others in a raid by the Anti-Corruption Agency ('ACA') on 27 August 2008 on suspicion of being involved in corrupt practices. The claimants were subsequently released and not charged in any court of law. They went back to work on 28 August 2008. The company issued show cause letters dated 3 September 2008 to both claimants alleging that they were in breach of the company's Ethics Code and Business Practice. They were also suspended from work for 14 days pending further investigation. The claimants replied to the show cause letters but they were dismissed on 11 September 2008 without any domestic inquiry. The company contends that the arrest of the claimants by ACA violated the terms and conditions of the company's Code of Ethics and Business Conduct. It was further contended that the claimants tarnished the company's image by being arrested by the ACA. The learned Chairman held that the dismissal of both the claimants were without just cause and excuse. Among others, he states as follows:
‘There is only one reason advanced by the company for dismissing both claimants and that is as the facts suggest that both claimants were arrested by Malaysia Anti-Corruption Commission on 27 August 2008 on suspicion of being involved in corrupt practices in Contravention of s. 11(a) of Anti-Corruption Act 1997 (now repealed and replaced by s. 17(a) of the Malaysian Anti-Corruption Commission Act 2009).  It was not denied by the company's witness that both claimants were not accorded a due inquiry before they were dismissed by the company.’”
How Your Organisation Can Benefit From This Case
MACC Processes Need to Be Looked Upon Separately From Company Processes
This case clarifies the law’s position that when it comes to bribery and corruption, an organisation is still required to conduct its independent due process, irrespective of what steps/procedures the MACC initiates.
It is important to note here that while the employee arrested by the MACC faces potential criminal charges, he/she still remains an employee of the organisation and needs to be accorded due process (in accordance with company procedures) before a dismissal can be effected.
Relying on Issues Like ‘Image and Reputation’ is Flimsy
Another important observation we can take from this case is the court’s view that simply being arrested by the MACC (be it within the company premises or off-premises) and having the arrest reported in the press is insufficient justification to contend that an employee has tarnished the image and reputation of the company sufficiently to justify a dismissal. Whatever the corporate embarrassment, due process still needs to be administered. This means ensuring a show cause letter is issued and a domestic inquiry convened within the organisation before any decision to dismiss is made.
On the Flipside, an Organisation Can Still Dismiss an Employee Irrespective of the MACC’s Findings
While this case decision clarifies the importance of a company administering due process, an organisation (on the flipside) needn’t necessarily wait for the outcome of the criminal proceedings against the employee by the MACC to be completed either before deciding to dismiss the employee. So long as the organisation administers its due process and conducts a valid and thorough domestic inquiry, it is entitled to dismiss an employee for corruption – irrespective of the outcome of the MACC investigations.