The Dilemma of Whether to Conduct or Not to Conduct a Full Domestic Inquiry

Sep 06, 2022 8 Min Read
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Domestic Inquiry in Malaysia

There are several schools of thought on the subject of inquiries on disciplinary issues at the workplace. Some say a full domestic inquiry (DI) is not compulsory, a show cause inquiry will suffice. Some say a meeting with top management to discuss the disciplinary issue at hand with the alleged employee is enough as long as the management is satisfied “on the balance of probabilities” that the alleged employee did what he was accused of doing and that whatever transpired in the meeting was minuted. Yet some say, a summary dismissal sans any kind of inquiry is lawful when the misconduct in question tantamount to a criminal offence, e.g. drug abuse or theft.

Let us look at what the Malaysian law has to say about inquiries.

Statutory provisions

S.14(1) of the Employment Act (EA) 1955 makes it a must for employers to conduct “due inquiry” before a punishment can be meted out on an employee. In fact, with the 2022 amendment to the EA now extending the coverage of the statute to ALL employees, this requirement for due inquiry is now compulsory for every alleged employee under a contract of service with the Company.

Before I elaborate further on this statutory provision, I would like to clarify one vital point about inquiries.

S.14(1) EA 1955 states very clearly as follows:

14. Termination of contract for special reasons

(1) An employer may, on the grounds of misconduct inconsistent with the fulfilment of the express or implied conditions of his service, after due inquiry

(a) dismiss without notice the employee;

(b) downgrade the employee; or

(c ) impose any other lesser punishment as he deems just and fit, and where a punishment of suspension without wages is imposed, it shall not exceed a period of two weeks.

The statutory provision is clear in that the finding of guilt after due inquiry is not necessarily punished by the maximum penalty of dismissal. Depending on the degree of guilt (including contributory factors by other parties), and also other mitigating factors, the employee may be punished with downgrading, suspension, or any other lesser punishment e.g. a warning letter.

How exactly is a due inquiry supposed to be done has never been specified by statute. Basically what is important is that the employee is afforded a fair hearing, i.e. a chance to be heard by an impartial party or panel before he is deemed guilty or otherwise, of the alleged offence.

An employer should also bear in mind that an inquiry should never be done with dismissal in mind. That is already a prejudgment on the part of the employer and defeats the whole entire purpose of holding an inquiry.

Another important statutory requirement with regard to inquiries is S.20(1) of the Industrial Relations Act (IRA) 1967, which states that:

Representations on dismissals

20. (1) Where a workman, irrespective of whether he is a member of a trade union of workmen or otherwise, considers that he has been dismissed without just cause or excuse by his employer, he may make representations in writing to the Director General to be reinstated in his former employment; the representations may be filed at the office of the Director General nearest to the place of employment from which the workman was dismissed.

Although the word “inquiry” is nowhere to be found here, the phrase “dismissed without just cause or excuse by his employer” shows that an employer is required to establish just cause and excuse before arriving at a decision to dismiss an employee.

So, how is just cause and excuse established? By holding an inquiry, of course.

Common law

The courts have agreed that the absence of a DI, as in the full blown version, is not fatal to an employer’s case. The employer has to justify its actions before the court by leading all relevant evidence before it: Malayawata Steel Bhd v. Mohd Yusof Abu Bakar & Anor [1994] 1 MLRH 177.

In Skypak International (M)_Sdn Bhd v. Foong Kah Tin [1987] 1 ILR 495 the followings were stated:

(i) That the workman whose conduct or misconduct is being inquired into must have reasonable notice of the case he has to meet.

(ii) That he must have a reasonable opportunity of being heard in his own defence according to the maxim audi alteram partem and this includes inter alia, the opportunity to face and challenge his accusers, witnesses and whatever evidence there is against him, and

(iii) That the hearing must be held before an impartial tribunal. ie. A person who is neither directly nor indirectly a party to the case.

In Ireka Construction Berhad v. Chantiravathan Subramaniam James [1995] 1 MELR 373 the Court held:

It is a basic principle of industrial jurisprudence that in a dismissal case the employer must produce convincing evidence that the workman committed the offence or offences the workman is alleged to have committed for which he has been dismissed. The burden of proof lies on the employer to prove that he has just cause and excuse for taking the decision to impose the disciplinary measure of dismissal upon the employee. The just cause must be, either a misconduct, negligence or poor performance based on the facts of the case.

This again shows that as long as the principles of natural justice as in Skypak are followed in the process of adducing evidence to prove just cause and excuse then any form of inquiry suffices.

In any case, the findings of a DI are not binding upon the Industrial Court. There is a plethora of cases on this but the most notable is Hong Leong Equipment Sdn Bhd v. Liew Fook Chuan & Other Appeals [2001] 2 ILR 180 Gopal Sri Ram JCA held:

The fact that an employer has conducted a Domestic Inquiry against his workman is, in my judgment, an entirely irrelevant consideration to the issue whether the latter had been dismissed without just cause or excuse. The findings of a Domestic Inquiry are not binding upon the Industrial Court which rehears the matter afresh. However, it may take into account the fact that a Domestic Inquiry had been held when determining whether the particular workman was justly dismissed.

Show cause inquiries

In the case of Siti Dzahirah Harun v. Mahkamah Perusahaan Malaysia & Anor [2019] MLRHU 1321 the applicant was dismissed after the employer found her guilty of the charges of misconduct levelled against her based on her reply to a show cause letter containing the charges. The High Court held in this case followed the principle in Dreamland Corporation (M) Sdn Bhd v. Choong Chin Sooi & Anor [1987] 1 MELR 39.

In Mohamad Haffiz Borkhan @ Sulaiman v. Airasia Berhad [2019] MELRU 2390 the Industrial Court also accepted the method of inquiry by the issuance and reply of a show cause letter, however, the court in this case found that the punishment of dismissal was too harsh for the charges levelled against the employee.

Generally therefore, show cause inquiries are acceptable by the courts, whether or not the end punishment is dismissal.

Criminal misconduct

The basic law regarding criminal misconduct in the workplace can be found in the case of Eastern Union Rubber Products Sdn Bhd v. M Elangovan [1991] 1 MELR 61. In this case, the test formulated in Ferodo Ltd v. Barnes [1976] IRLR 439 is relevant. The EAT (Employment Appeal Tribunal) said:

It must be remembered that in dismissing an employee, including a dismissal where the reason is criminal misconduct, the employer need only to satisfy himself that, at the time of the dismissal, there were reasonable grounds for believing that the offence put against employee was committed. The test is not whether the employee did it, but whether the employer acted reasonably in thinking the employee did it, and whether the employer acted reasonably in subsequently dismissing him.

Nothing is stated in that case about having to conduct any form of inquiry prior to taking action against an employee for criminal misconduct, which means that summary dismissal upon finding of proof criminal misconduct on the balance of probabilities will suffice.

In Khairul Fitri Mohd Ariffin and Anor v Westports Malaysia Sdn Bhd (Industrial Court Award No 3235 of 2019) the Industrial Court dismissed two employees’ claims for unfair dismissal and held that their summary dismissal from the company was justified upon testing positive for drugs following a random drug test by the National Anti-Drugs Agency (AADK). The claimants asserted that they did not have any record of drug abuse throughout their employment with the company, and that in tests taken of their own accord nearly a month after the initial tests conducted by AADK proved negative for THC.

In dismissing their claims, the Industrial Court held, inter alia, that given the nature of their work in the company, they were not only endangering themselves but also others around them by being under the influence and considering its size and the nature of its industry, the company was justified in summarily dismissing the claimants for drug abuse.

An employer who wishes to have all angles covered in his case may however choose to hold an inquiry in a case of criminal misconduct such as theft. There are virtues in holding an inquiry, as was illustrated in the case of Ramasamy Perumal v. DHL Supply Chain (Malaysia) Sdn Bhd [2019] 1 MELR 461.

On 11 November 2016, a police report was made by the employer against the claimant for alleged theft of company property. On 23 November 2016, the company issued the claimant a show cause letter containing a charge that he had removed company’s goods from the racking area and kept them under his control by placing them under his working desk without the authorisation or approval of his superior. On 15 December 2016, the company convened a DI against the claimant and eventually, he was found guilty of the same charge. In defence, the claimant contended, inter alia, that:

(i) the Domestic Inquiry Panel did not take into account the claimant’s version of the incident when the it decided that the claimant had stolen/attempted to steal the company’s goods;

(ii) there was no evidence of any intention on his part to steal the company’s goods;

(iii) that he had never stolen/attempted to steal the company’s goods, and the said goods were intact and had never been taken out of the company’s premises; and

(iv) the company did not incur any losses in the matter as alleged against the claimant.

Hence the claimant claimed that he was dismissed without just cause and excuse and it amounted to an unfair labour practice.

The Industrial Court, in dismissing the claimant’s claim, held that any criminal investigation initiated against the claimant should be treated separately from any internal investigative process of the company. The fact that the employer had addressed the fact that the claimant had removed the company’s goods and kept them under his control without the consent or approval of his superior, and found him guilty of the same in the DI was enough to establish his dishonest intention to deprive the company of its possession of the same which tantamount to theft of the said goods.

Listen to this podcast: Why Domestic Inquiry Should Be taken Seriously

So, to inquire or not to inquire?

It all depends on the factual matrix surrounding the case, the industry in which the employer operates, the strength of the employer’s case and the expertise of the company personnel handling the case. I am an advocate of holding full-blown DIs for most types of misconduct except in very special circumstances where the evidence against the employee is so overwhelming. It is better to be safe than sorry. In the case of smaller companies or business without a proper HR setup, perhaps the advice of external counsel, consultants, employer unions or trade associations with IR expertise can be sought.

The key thing to remember is that whichever the choice, the principles of natural justice must be adhered to, and never hold an inquiry as a mechanism to set an employee up.

You may also like this: HR Matters: When Employees Leak Confidential Information

This article was also published on medium.com
 

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Tahirah Manesah Abu Bakar is a HR & termination specialist and Research Fellow of the National Human Resources Centre. She is a familiar face at IR and HR conferences, webinars and workshops, speaking on a wide range of employment law and leadership topics, and posts regularly on LinkedIn. Tahirah Manesah holds an LL.B (Hons) from the University of Greenwich, London and is currently reading for a PhD in Business Administration at AeU
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