Domestic Inquiry : Is it compulsory in Malaysia ?

Q1. What is a Domestic Inquiry?

Answer:

A Domestic Inquiry (“DI”) is an internal investigation process conducted by an Employer to investigate the conduct of an employee at work, whether the employee has committed an act of misconduct. The DI is a method that allows the alleged employee to have the chance to defend the charges against him.

Q2. Is a DI required under the Malaysian law?

Answer:

Under Malaysian law, where an employee is subject to the Employment Act 1955, it is a statutory obligation imposed on the Employer to conduct a due inquiry to determine whether an employee is guilty of misconduct before the employee can be dismissed or before imposed any major penalty on the employee .

Q3. How is a due inquiry should be conducted?

Answer:

Section 14(1) of the Employment Act 1955 does not define and does not specify what amounts to “due inquiry” or how an inquiry should be conducted. But it does not necessarily mean that the Employer must conduct a formal DI.

What is important that the Employer must investigate the matter fairly and that the employee is given a fair hearing and/or a chance to be heard before he is deemed guilty or not guilty of the alleged offence.

Q4. If an employee lodges a complaint of unfair dismissal against his Employer for not conducting a DI, how will this affect the Employer?

Answer:

Under Malaysian law, the failure to hold a DI is not fatal the Employer’s case at the Industrial Court. It was held by the Court that a defective inquiry or failure to hold a DI is not a fatality but only an irregularity curable by de novo proceedings before the Industrial Court .

Q5. What are the disadvantages of having a DI?

Answer:

• It can be a very time consuming if the Employer intends to be as thorough as possible.

• Since the Panel of DI should be independent, there is a chance that they could decide the employee is innocent and it would be difficult for the Employer to justify termination if its own DI found the employee innocent of the charges.

Q6. How to properly hold a DI?

Answer:

The basic steps in holding a DI are as follows:-

• Issuance of a Show Cause Letter
It is important to state the allegations of the misconduct clearly and precisely to the employee. A letter that includes the specific charge of the offence, date, time, place and which rules or regulations have been violated.

• Response to the Show Cause Letter
The employee should be requested to provide their explanation in writing as to why disciplinary action should not be taken and should respond the show cause letter within the stipulated timeframe.

If the explanation is acceptable and satisfactory, no punishment should be imposed on the employee. However, if the employee fails to respond and/or if the explanation is unacceptable, the Employer can either:-

a. Take disciplinary action; or
b. Issue a notice of DI if it feels the allegations are serious enough to warrant it.

• Issuance of Notice of DI
The employee should be given sufficient and reasonable notice of the DI so he will have time to prepare his defence.

The notice of DI should comprise of the following:-

a. Specific charge which states the type of offence, date, time and place where the offence took place;
b. Details of the DI (date, time and place of the DI);
c. Inform the employee’s rights to bring along witnesses or any documentary evidence (if any).

• Suspension
The suspension can be issued together with the show cause letter or before the DI, if it is necessary, pending further investigation of the allegation of the misconduct.

The maximum period of suspension is not more that 2 weeks with half wages . However, the Employer must pay back the remaining wages if the employee is later found to be not guilty.

• Appointment of the Panel of DI

The Panel must consist of people who are neither directly nor indirectly connected to the matter. The Panel members should consist of employees who are more senior than the alleged employee and if possible, from different departments. The Panel members should not have prior knowledge about the charges against the alleged employee and should not have been involved in the investigations.

• Hearing of DI

a. The prosecution will begin first. They are to make out a case against the alleged employee by producing witnesses who have direct knowledge of case and also present documentary evidence which support the charges.

b. The alleged employee will then be allowed to question (cross examine) each of the witnesses on the evidences they have given.

c. Then, the alleged employee will be asked to enter his defence i.e. to tell their side of the story. He may produce his own witnesses and documentary evidence to support what he has said. The alleged employee as well as his witnesses are subject to cross-examination by the prosecutor. The chairman will guide the proceeding and to record the evidences in writing.

d. At the conclusion of the hearing, discussion will be held and study the evidences given by both parties.

e. Thereafter, the chairman will submit the Panel’s finding and recommendations to the Management for their decision.

Q7. What is the recommended punishment and/or sentence if the employee is guilty?

Answer:

Management’s decision generally falls into these categories:-

• To dismiss the employee without notice; or
• Downgrade the employee; or
• Impose any other lesser punishment as deemed just and fit (eg: 2 weeks suspension with half wages, denied salary increase or bonus)

Q8. What happens if the employee is not happy with the decision of the DI?

Answer:

It depends on the Employer’s policies and procedures whether the employee can appeal against the decision of the DI as the DI is a purely internal process.

If the employee feels he was unfairly terminated based on the finding of the DI, the employee may lodge a complaint for unfair dismissal pursuant to Section 20 of the Industrial Relations Act 1967.

Q9. Can an employee get legal representation at the DI?

Answer:

It is up to the Employer to decide whether the employee can be legally represented during the DI proceedings.

Usually, the Employer will not allow external legal representation as the inquiry is by its nature, meant to be “domestic” (no outside parties involved).

Q10. In what circumstance can Employer terminate an employee immediately?

Answer:

Summary dismissal (termination without notice or payment of salary in lieu of notice) is allowed in cases where the act of misconduct is so serious that the Employer is justified in terminating the employee immediately.

There are some types of misconduct which would warrant a summary dismissal:-

• Committing a crime at work (eg: theft, froud)
• Giving or taking bribes
• Intoxication at work causing risk of injury or death

FOOTNOTES 

[1]  Section 14(1) of the Employment Act 1955.

[2] Wong Yuen Hock v. Syarikat Hong Leong Assurance Sdn Bhd & Another Appeal [1995] 3 CLJ 344 which followed the Supreme Court’s decision of Dreamland Corporation (M) Sdn Bhd v. Choong Chin Sooi & Industrial Court of Malaysia [1988] 1 CLJ 1.

[3] Section 14(2) of the Employment Act 1955.

[4] Black Law’s dictionary defines misconduct as a transgression of some established and definite rule of action, a forbidden act, a dereliction from duty, unlawful behaviour, wilful in character, improper and wrong behaviour.

THIS FAQ IS PREPARED AND PUBLISHED BY GENERAL LITIGATION, CORPORATE INSOLVENCY AND APPELLATE DEPARTMENT OF THE DISPUTES RESOLUTION OF MESSRS GAN & ZUL, ADVOCATES & SOLICITORS.