Termination or dismissal with cause is a right granted to Malaysian employers that allows them to terminate an employee immediately.
However, the dismissal may be challenged under Section 20 of the Industrial Relations Act 1967. If found to be handled unfairly, the employer can be forced to reinstate the employee or pay compensation.
This why when advising clients on employment matters, we always emphasise this:
Fair process protects the employer.
Below, we cover how termination with cause should be carried out in full compliance with Malaysian labour law.
Let’s begin.
Why process matters even if misconduct is obvious
Termination with cause is a disciplinary action, and under Malaysian law, when challenged, the courts look beyond the misconduct itself and examine whether the termination was carried out fairly.
It’s not just about what the employee does, but how the employer responds.
Section 14(1) of the Employment Act 1955 requires employers to conduct a ‘due inquiry’ before dismissing an employee for misconduct. This section also allows for suspension during the inquiry (up to 2 weeks on half-pay).
In practice, the fair process usually expected by the courts include:
- notifying the employee of the alleged misconduct (i.e., a show cause letter)
- giving the employee an opportunity to respond
- holding an internal investigation, and
- ensuring disciplinary outcome is proportionate
Skipping just one step can cause a dismissal to be ruled procedurally unfair.
That’s when employers start worrying about reinstatement or compensation orders.
Common grounds for dismissal with cause
The most common forms of misconduct that can justify immediate dismissal include:
- dishonesty or fraud
- theft or misappropriation of company property
- threats, violence, or harassment at the workplace
- wilful insubordination or refusal to follow lawful instructions
- habitual late attendance or unauthorised absenteeism
- breach of confidentiality or conflict of interest
- serious breach of company policies or safety protocols
And in case you’re wondering, yes, absenteeism is also a cause for dismissal, and we’ve dedicated an entire section on it below!
Real-life example: Unfair process
In 2017, Bank Negara Malaysia (BNM) dismissed a senior manager named Kohila over ethics violations.
However, the court found numerous violations as Kohila was:
- denied access to documents used during the in-house proceedings
- not allowed legal representation during the inquiry
- not given a list of the bank’s witnesses, preventing proper cross-examination
- barred from calling external witnesses, despite charges involving events outside the bank
- obstructed from cross-examining witnesses
- not called to testify in her own defence, violating the bank’s own procedures
- not given a chance to plead for a lesser punishment, despite 12 years of recognised service
Her final appeal to the bank’s governor was also treated as a mere formality and in 2024, the High Court found the dismissal procedurally unfair and ordered BNM to pay RM366,000 in compensation.
It wasn’t about what Kohila did, but how BNM responded.
Absenteeism as misconduct: What employers should know
Absenteeism is expressly defined under Section 15(2) of the Employment Act 1955 which states:
If an employee is absent for more than two consecutive working days without permission or valid reason, it may be treated as a contract breach.
Repeated or prolonged absenteeism may even amount to a willful breach, which opens the door to termination without notice under Section 13(2) of the same Act.
But as always, employers must act reasonably and promptly.
In addition to issuing a show cause letter, giving warnings, and keeping a record, do not leave a gap between instances of absenteeism and disciplinary action.
Do I need a letter for misconduct termination?
If you were our client, our answer would be a resounding “Yes!”
Whether a termination is due to misconduct, absenteeism, or breach of duty, a formal termination letter shows the employer followed through in a structured, documented way.
In court, only the reasons stated in the letter will be considered.
That letter becomes your official record and legal footing.
As we explained in our guide to termination without cause, skipping this can leave you without a strong defence.
Checklist for termination with cause
Before issuing a dismissal letter, ensure the following are in place:
- clear and specific reason for dismissal
- supporting documents or internal records maintained
- show cause letter issued and employee given opportunity to respond
- disciplinary action applied consistently, and
- absenteeism, if relevant, addressed without delay
At ELP, we regularly assist clients in drafting employment contracts, internal policies, and disciplinary frameworks that align with Malaysian law. If you are looking to revise or strengthen your HR documentation, get in touch with us today.
