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The Concept of Termination Simpliciter

And Issues Concerning It in the Malaysian Courts

 

 

 

Part I. Introduction

 

An Overview of This Essay

This essay was written for an assignment of the subject the Labour Law in Malaysia. The original instruction was: Apakah yang dimaksudkan dengan termination simpliciter? Bincangkan pendirian mahkamah di Malaysia tentang isu ini (What is the meaning of termination simpliciter? Discuss the stand of the Malaysian courts regarding this issue). In answering the question given, this essay is divided into three parts. Part I is the Introduction, consisting of this section, to provide an Overview of the whole assignment and also the following section, On the Relation of Employer and Employee and Its Problems, to give a picture of the background where the relationship of the employer and employee is played against. Part II seeks to answer the questions, What is a Contract of Service? and What is termination simpliciter? Part III will present the approach taken by the Malaysian Courts regarding the practice of termination simpliciter and finally Part IV will be the Summary and Conclusion of this essay.

 

On the Relation of Employer and Employee and Its Problems

The employer-employee relationship is both inevitable and odd. Inevitable because when society became industrialized, there is no other way for man to maintain his enterprise but by eliciting the services of others. Thus began the master-and-worker engagement, in which also gave birth to a struggle between the two. This is the oddity of the bond; the tension of opposing aims, i.e. the symbiotic nature of the relationship and the egocentric character of both parties.

 

“With its [the workers’] birth begins its struggle with the masters.”[1]

 

That the employer-employee relationship is symbiotic is no doubt. Both the employer and employee provided considerations to receive gains and thus each complementing the lack of the other in order that a win-win situation prevails. Nonetheless, this symbiosis is far from perfect. In former times, it was even less than acceptable – the workers were considered hired-slaves rather than professed tradesmen. Discriminations and abuses were not uncommon, but one must be reminded that those were days before workers’ rights were invented. When the Leftists had garnered enough political influence in the society, the pressure increased on the Industrialists, the workers’ rights cannot be ignored anymore. Consequently, the conditions of the workers improved and were guaranteed by the law. This, however, had not solved the problem of self-serving ambitions of both the employer and the employee. The two tried to gain advantage over how much it ought to be given away. “How much can I not provide for the worker?” the employer would conspire while the employee is wont to consider what extras may he gotten from his employer. Employment then became a ground of competition between opposing ambitions, played by the manipulations of loopholes in the law and encouraged by greed.

 

Believing that the struggle goes on, this essay looks at the issue in the current Malaysian context, of which today is most apparent in cases that were arbitrated in the industrial courts, the mahkamah perusahaan. The subject discussed, however, is narrowed to the contract of employment, and is further narrowed to the issue regarding its termination, which finally boils down to the practice of termination simpliciter.

 

 

 

 

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Part I. On Contracts In Employment

 

Contract of Employment

 

“The workers go through various stages of development.”[2]

 

If anything, one of the greatest achievements of the said development must have been the creation of the Contract of Employment. As mentioned heretofore, in the old epoch, the antagonism of classes was very much unequal with the power of control reposing in the hands of the employers, or rather, the masters. It was then a progress when the employee is considered a party to a contract upon the engagement of hire. To be so considered would mean that the employee is finally regarded as a person of respectable, if not equal, standing and this indeed is a positive evolution from the days of the feudal lords’ rule over their vassals. Now the servant may come to the round-table to bargain his terms before considering to work with the master. The contract of employment then is not only a valuable document, but also a monumental achievement in the struggle of classes, especially that of employer-employee.

 

The Contract of Employment, or more popularly, Contract of Service (now referred as CoS) is the common ground upon which the two parties in the engagement of hire stand. In view of the tension in the relation as mentioned above, such a covenant is important in order that the employer and employee may cooperate and the relationship may operate, effectively. It may as well be the sine quo non of this relationship, not only that it may function effectively, but that it may function at all, considering once again the painful disputes that may arise from such a relationship. To say that the contract “governs their [employer and employee] relation”, in the words of Lord Denning[3], and it is “a most formidable point”[4] in that relation, is not at all overrating its importance. Indeed as with other type contracts, the CoS reduced to writings that which dictate the terms by which a relationship may come to be formed and hereinafter no other terms may be concluded save for that in the contract. The CoS is the terminus a quo of the engagement of hire.

 

The Ending of the Contract of Service

If the terminus a quo of the engagement of hire is the formation of the CoS, then the terminus ad quem of it must be the termination of the same. Such termination may be induced by several manners in practice but the present essay shall only concentrate on the practice of termination simpliciter. As provided by s12 (1) of the Second Part (Contracts of Service) of the Employment Act 1955[5] (hereinafter EA 1955), one manner by which the termination of the CoS may be effected is the issuing of a notice of intention for such action. The initiative may either move from the employer or the employee, so long as alongside the notice, the notified party is given ample time to conciliate the course of action taken by the notifying party. S12 (2) stipulated the time-length of such notice; the ones agreed and as enshrined in the CoS or, in the absence of such agreement, it will be subjected to the time-rule given by subsections (2) (a), (b) or (c).

 

The abovementioned provisions were created to serve the convenience of both contracting parties. Nonetheless, it can be seen from many actual practices (or rather malpractices) that these provisions beget injustice. There were instances when the employer had purportedly terminated the service of his employee on contractual terms, when in fact it was an unjust dismissal. The law being thus manipulated ceases to secure the rights of the workers, baring them to the arbitrary decisions of their employers. Plus c'est la même chose, this render the state of our society no different from that of the former epoch when the servants lived at the mercy of the masters. That which we call termination simpliciter, that is, “a termination by contractual notice and for no reason”[6], must not stand at all if it does not stand on just ground.

 

 

 

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Part II. On The Trend of The Malaysian Courts in Approaching The Practice of Termination Simpliciter

 

The vindications for the stance taken by the Malaysian courts towards the practice of termination simpliciter are embodied in the learned opinions of Gajendragadkar J. in R.B. Diwan Badri Dass & Ors v. Industrial Tribunal, Punjab, Patiala & Ors:

 

The doctrine of the absolute freedom of contract has to yield to the higher claims for social justice…the right to dismiss an employee is controlled subject to well recognized limits in order to guarantee security of tenure to an (industrial) employee…

 

And also the United Kingdom’s Employee’s Right Act 1996, section 94:

 

                An employee shall have the right not to be unfairly dismissed by his employer.

 

The judicial conscience of the sacred court would not allow such injustice to prevail as that of the unjust termination of an employee ostensibly in accordance to contractual terms. Common sense had aided the common law to see through the disguise of termination simpliciter. Gunn Chit Tuan J and Raja Azlan Shah CJ (MALAYA), sitting on the bench of the Federal Court in Goon Kwee Phoy[7] emphasized that there is not “any material difference between a termination of the contract of employment by due notice and unilateral dismissal of a summary nature”. Their eminences further observed that the consequence of the former is the same as the latter and hence the results they yield must also be alike.

 

The following section is the analysis of four cases which occurred in the period of about seven years (1980 – 1987) to determine the persuasion of the Malaysian courts regarding the practice of termination simpliciter in details.

 

Dr. A Dutt v. Assunta Hospital[8]

The Claimant, Dr. Dutt, an Indian national was working as a Radiologist in Assunta Hospital when he was given a letter/notice of termination. Thereafter he brought a suit against the Hospital for unreasonable dismissal. The Industrial Court awarded the Claimant a compensation of $522,000.00 in lieu of reinstatement on the reason that the termination was done without just cause or excuse. An appeal was filed. The case was eventually heard up to the Federal Court, which concurred with the judgement of the Industrial Court. Chang Min Tat FJ speaking for the court, declared that “the so-called ‘termination simpliciter’ which is not grounded on any cause or excuse would enable the Industrial Court to award compensation if it would not order reinstatement.

 

This ratio as pronounced by the Federal Court in Dr. A Dutt’s case would later become a landmark on which to base future like cases. Not only did it became a well-worn guiding mantra in industrial law – termination simpliciter, i.e. a termination by contractual notice and for no reason, if not grounded on any just cause or excuse would still be a dismissal without just cause or excuse – it also became a protective mantra to the employees against unfair terminations of service. The principle laid called for accountability on part of the employer in exercising of his powers and rights in the engagement of hire. He cannot, by the operation of the law, and indeed he must not, by the operation of human conscience,

claim an absolute right to ‘hire and fire’ any of his employees [even] in accordance with the terms of contract of employment.[9]

 

Goon Kwee Phoy v. J & P Coats (M) Bhd.[10]

This case involved Mr. Goon Kwee Phoy (the Claimant) who was dismissed by J & P (the Company) on the ground of redundancy of personnel. The Claimant challenged the justification provided in the industrial court, won the case and was awarded by means of compensation for being unjustly dismissed. The Company appealed to the High Court. The High Court concurred with the industrial court’s decision regarding redundancy, i.e. there was no redundancy, but overruled that it was the right of the Company to terminate the service of the Claimant in accordance to the CoS consistent with s12 (1) of the EA 1955 without incurring liability under the IRA 1967 to an order of reinstatement or compensation in lieu of reinstatement.

 

On appeal to the Federal Court which shortly before had just decided on the case of Dr. A Dutt, the decisions of the High Court were reversed on the ground that the termination simpliciter was the same as the unilateral dismissal of summary nature. Thus, it was held that because there was no ground to believe the justification (to dismiss the Claimant) given by the Company to be true, the Claimant was dismissed without a just cause or excuse following the ratio in Dr. A. Dutt’s case. The court, per Raja Azlan Shah CJ made a very invaluable observation that had also subsequently served as a landmark rule for future decision regarding termination simpliciter. The court explicitly mentioned that there is no “material difference between a termination of the contract of employment by due notice and a unilateral dismissal of a summary nature. The effect is the same and the result must be the same.” Hereinafter, the two actions were treated to be alike and this provided a solid guideline to both the legal fraternity and the employer-employee.

 

Federal Aluminium Sdn. Bhd., Prai v. Kochunni a/l Kuttan Nair[11]

This case was refered to the Mahkamah Perusahaan under the provisions of s20 (3) of the IRA 1967, arising out of Mr. Kochunni’s (the Claimant) dismissal by the Federal Aluminium Sdn. Bhd. (the Company). The Company had alleged that the Claimant’s dismissal was due to his breach of the CoS vis-à-vis s15 (2) and s60F (2) of the EA 1955.  Although the case did not involved the issue of termination simpliciter, but it is worth mentioning for it typified the stance of the Mahkamah Perusahaan concerning the issue of dismissal without just cause or excuse.

 

Indeed a most beautiful embodiment of “justice to the labourers”, Datuk Wong Chin Wee’s statement seemed so appropriate to proceed from the bench of the Mahkamah Perusahaan:

 

“…in dismissal cases this court (Industrial Court) must insist on good and convincing proof of the charge against the workman. This is an absolute prerequisite for the Court to uphold a dismissal if the protection given to workmen by S.20 of the Industrial Relations Act 1967 of security tenure in their jobs against unjustified dismissals is not to be negated. This principle is so basic that ignorance of it can be no excuse at all.”

 

The persuasion of the Malaysian courts, therefore, is inclined towards labourers’ welfare rather than the employers’ profitability. The court in Kochunni even pointed out, obiter, in reference to Harun J[12] that there was clearly an inequality in the treatment rendered by the EA 1955 to the employer and the employee. It was noted that under the EA 1955, the employer commits an offence if he does an action contrary to s15, i.e. breach of the CoS while the same cannot be said of the employee. “Unlike the employer, there is no penalty clause in the Ordinance against the employee if he breaches his contract of service”. What is the significance of this position as taken by the courts? Arguably, the Malaysian industrial courts seemed to be favouring the latter in the tension of employer-employee relationship. Nonetheless, this has not been the panacea to the age old struggle. There are yet many instances of abuse, discrimination, exploitation, ostracism and unfairness especially regarding the issue of gender, wages, migrant workers and the union. That some light is shed to illuminate the ground for justice to flourish must not make us complacent, in view that the battle is still far from accomplished.

 

 

Malaysia Milk Sdn. Bhd. v. Ng Chee Meng[13]

This case was referred to the Mahkamah Perusahaan under the provisions of s20 (3) of the Industrial Relations Act 1967. Mr. Ng Chee Meng (the Claimant) claimed that he was unjustly dismissed from his post as the General Manager of Malaysia Milk (the Company) and sought either reinstatement or compensation as the court deemed appropriate. The Company argued that the action taken upon the Claimant was not dismissal but rather termination of service in accordance to Clause 2 of the CoS between the two parties, an act that the Company was entitled to.

 

Datuk Wong Chin Wee, sitting alone on the bench, held that the action taken was termination simpliciter and that such practice “is no longer acceptable as valid if challenge in industrial law”. The court then went on to hear the justifications of the Company in taking such action, of which there was found none to be reasonable. The termination was, therefore, in effect a dismissal without just cause or excuse as envisaged in s20 of the IRA 1967. Datuk Wong decided the case was for the Claimant.

 

If Ng Chee Meng is anything, it is a reinstatement of the well established rule – the termination simpliciter is no longer acceptable as valid if challenged in industrial law. The dicta of Raja Azlan Shah in Goon Kwee Phoy still echo in the court in Ng Chee Meng. Justice refused to give way to inequity even after half a decade. Quoting Raja Azlan Shah CJ, Datuk Wong emphasized once again that termination simpliciter is but a veiled unjust dismissal. In order that such abuse does not occur,

 

“the right of an employer to terminate the employment of a workman is now subject to industrial adjudication in this Court.”

 

 

 

 

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Part IV Conclusion and Summary

 

The bourgeois-proletariats struggle was set in the epoch of the war between Socialism and Democracy. This present time, however, is the age of social democracy, there is a tinge of socialism and some measures of democracy. We have learnt the lesson after paying a huge cost; communism cannot bring harmony and laissez faire will only promote disorder. Now we are learning to graft the two Branches together. It may not yield much result very soon, for we are still pruning, and are learning to prune.

 

There is, however, already ripen, one of the first fruits of our labour from the Tree. Of this Fruit, the Court said,

“…an employer cannot any longer base his right to discharge an employee purely on contract and he cannot be allowed to say that under contract he has an unfettered right to hire and fire his employee. That right is now subject to industrial adjudication…The employer can no longer rest his case merely on the contract of service or standing order and he cannot be allowed to say that having taken action under the powers so confirmed upon him, there is nothing more to be said by him to justify his action[14]

And the jurist said,

“…now that the age when management could ‘hire and fire’ at will is gone, it is possible to assert that the employer has a legal duty to treat his employees with due respect and consideration, mindful of their needs and problems and sympathetic of their difficulties. It is no longer possible to treat an employee as an expendable chattel or object without feelings and emotions[15]

 

The harvest of this Fruit is the termination of termination simpliciter, an occasion that calls for celebration and the looking forward to the next Season of Change.

 

When the errant employer terminates an employee, simpliciter, there is a public outcry asking, in the words of Emily Bronte’s character in Wuthering Heights, Mr Lockwood; Is there some new reason for this banishment? And the Court had done well in demanding an answer from such employer. The position of the courts in Malaysia for now is rather obvious. In a nutshell, What is known as termination simpliciter is no longer acceptable in industrial law.[16]

 

 

 

 

 

 

 

 

 

 

 

 

 



[1] Karl Marx and Friedrich Engels, The Communist Manifesto

[2] Ibid.

[3] Gascol Conversion Ltd v Mercer [1974] ICR 420, [1974] IRLR 155, CA

[4] Ibid. per Sir Hugh Griffiths, dissenting, in the Industrial Court

[5] Act 265 (as at 15th March 2004)

[6] per. cur. The Federal Court in Dr. A Dutt v. Assunta Hospital [1981] 1 MLJ 309

[7] [1982] 2 MLJ 136

[8] [1981] 1 MLJ 309

 

[9] L.C. Malhotra, Dismissal, Discharge, Termination of Service And Punishment

[10] [1982] 2 MLJ 136

[11] Award No: 123 of 1986

[12] Award No: 55 of 1982

[13] [1987] 1 ILR 175; Award No: 59 of 1987

[14] U.N. Dutt & Co Private Limited v. Its Workmen, A.I.R 1963 (S.C.) 411

[15] N.M. Selwyn, The Law Of Employment

[16] per. cur. Pembenaan Hashbudin (M) Sdn. Bhd. v. Thambipillai Sivagnanam (Award No: 247 of 1987)